In the North American trading session on Wednesday, silver prices (XAG/USD) made a notable recovery from a crucial support level of $30.50, spiking to an intraday high around $31.20. This resurgence followed the release of the US ADP Employment Change figures for November. The report highlighted that the private sector brought on 146,000 new employees, which was slightly under the anticipated 150,000 and significantly lower than the previous month’s adjusted figure of 184,000, initially reported as 233,000.
Despite these findings, the data didn’t heavily impact the US Dollar (USD). The US Dollar Index (DXY), which measures the dollar’s strength compared to a basket of six major currencies, gave up minor gains but managed to maintain its crucial support around 106.50. Meanwhile, the yields on 10-year US Treasury notes remained steady, near 4.27%.
Typically, higher yields on interest-bearing assets can lead to an increased opportunity cost for holding non-yielding investments like silver. However, in this instance, the sustained safe-haven appeal for silver appears to be driven by ongoing geopolitical tensions.
According to a report by Reuters, a statement from Hamas indicated they believe Israel is planning a hostage rescue operation in Gaza similar to the June operation in Nuseirat, which could jeopardize the truce between Iran and Israel. This heightened geopolitical situation has fortified silver’s position as a haven asset.
Looking ahead, investors are keenly awaiting Federal Reserve Chair Jerome Powell’s address at the New York Times DealBook Summit for insights on the future path of interest rates. Market sentiment, as suggested by the CME FedWatch tool, sees a 74% chance of the Fed reducing interest rates by 25 basis points to a range of 4.25%-4.50%. Meanwhile, the remaining likelihood leans towards rates staying the same.
Technical Analysis of Silver
Silver is attempting to push past its 20-day Exponential Moving Average (EMA), which is positioned around $31.30. Meanwhile, the 14-day Relative Strength Index (RSI) is fluctuating within the 40.00-60.00 range, implying a sideways trading pattern.
On the downside, key support for silver can be found along an upward-sloping trendline near $29.50, which takes its cue from the February 29th low of $22.30 on a daily chart. On the upside, resistance is likely near the horizontal support emanating from the May 21 high of $32.50.
Silver Daily Chart
Silver FAQs
Silver stands out as a valuable asset for traders and investors alike. Known historically as a store of value and currency, it provides a versatile option for those looking to diversify their portfolios. While not as renowned as gold, silver holds intrinsic value and serves as a potential hedge during inflationary periods. Investors have the option to purchase physical silver in forms such as coins and bars or engage with its price movements via Exchange Traded Funds.
Silver prices are influenced by a myriad of factors. Geopolitical uncertainty or the threat of a deep recession can boost silver’s price due to its status as a safe haven, although it is less prominent than gold. As a non-yielding asset, silver benefits from environments with lower interest rates. Its price also reacts to movements in the US Dollar (USD), as it is priced in dollars (XAG/USD). When the Dollar rises, silver’s price is often constrained, while a depreciation in the Dollar tends to buoy silver prices. Other determinants include investment demand, supply from mining operations, and recycling rates.
Industrially, silver sees significant usage, particularly in electronics and solar energy sectors. It boasts one of the highest electrical conductivities, outperforming even copper and gold. An uptick in demand can hike prices, while a decrease might suppress them. Economic trends in the US, China, and India also play a role in fluctuating prices. The industrial usage in the US and China and the demand for jewellery in India significantly affect silver prices.
The price of silver often mirrors that of gold. When gold prices climb, silver usually follows due to their shared safe-haven status. The Gold/Silver ratio, indicating how many ounces of silver equate to one ounce of gold, helps gauge the comparative valuation of the two metals. Investors might see a high ratio as a sign that silver is undervalued or that gold is overvalued. Conversely, a lower ratio may indicate the opposite.
