Silver (XAG/USD) found resistance at fresh four-year highs right above $51.70 and retreated sharply during Mondfday’s European morning session. The metal found support at the 50..15 area to pare some losses, but is struggling to remain above $51.00 at the time of writing.

The fundamental context is supportive for precious metals, which rallied during the Asian session with investors looking for alternative assets as the US trade rift on rare earths threatens to lead to a full-blown trade war, again.

Furthermore, the US Government shutdown enters its third week without prospects of a solution in sight, and with investors pricing in a Fed rate cut later this month and high chances of another one in December.

Technical analysis: The bullish trend remains in play with $52.00 on focus

Silver maintains its bullish trend intact, with price action moving within an ascending channel from mid-September lows. The trend looks well overextended, and these structures tend to lead to corrections, but that option seems highly unlikely in the current circumstances.

Technical indicators show a significant bullish pressure, with immediate resistance at the intra-day highs of $51.70. Further up the ascending channel’s top, in the area of 52.00 and the 161.8 Fibonacci extension of the October 9 reversal, at $52.90, are plausible targets.

So far, pullbacks are attracting buyers, and the pair seems to have significant support in the area around the $50.00 psychological level, where bears were capped earlier today. Further down, the base of the ascending channel is in the vicinity of $49.55.

Silver FAQs

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.