Silver (XAG/USD) retreated from weekly highs near $52.00 on Wednesday, as the US dollar jumped following the release of hawkish FOMC minutes. The precious metal is now hovering around the $51.00 level, although it keeps its broader uptrend intact, while above the $50.00 area.
The Fed cut interest rates by 25 basis points in December, but minutes of the meeting, released on Wednesday, showed significant opposition within the committee. This has prompted investors to reduce hopes for another rate cut in December, sending the US dollar higher across the board.
XAU/USD has a strong support area at $50.00
The technical picture shows hesitation, with price action moving within a trading range on Wednesday, with upward attempts capped below the previous support area at $52.00 (Nov 13 lows), and bearish action contained above the key $50.00 area.
Long wicks on the daily chart reveal indecisiveness in the market. On the downside, the bears should confirm a breakout of the confluence of support levels in the $50.00 area, where Wednesday’s low meets the 50% Fib retracement of the early November high and the rising trend line from the late October lows.
In case of further decline, the focus will be on the high of October 13 and low of November 18 at $49.35, ahead of the 61.8% Fibonacci retracement levels of the mentioned session, near $48.90.
Conversely, bulls will have to break the mentioned $52.00 area to shift focus towards the November 14 high of $53.65 and the longer-term high between $54.60 and $54.80.
Frequently asked questions about silver
Silver is a precious metal that is widely traded among investors. It has been used historically as a store of value and 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 periods of high inflation. Investors can buy physical silver, in the form of coins or bullion, or trade it through instruments such as exchange-traded funds, which track its price in international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession could cause the price of silver to rise due to its safe-haven status, although to a lesser extent than the price of gold. As a non-yielding asset, silver tends to rise as interest rates fall. Its movements 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, while a weak dollar is likely to push prices higher. Other factors such as investment demand, mining supplies – silver is more plentiful than gold – and recycling rates can also influence prices.
Silver is widely used in industry, especially in sectors such as electronics or solar energy, as it has one of the highest electrical conductivity of all metals – more than copper and gold. A rise in demand can cause prices to rise, while a fall tends to bring them down. Dynamics in the economies of the United States, China and India can also contribute to price fluctuations: for the United States, and especially China, its large industrial sectors use silver in various processes; In India, consumer demand for the precious metal used in jewelery also plays a major role in determining prices.
Silver prices tend to follow gold movements. When gold prices rise, silver usually follows suit, as its status as a safe haven asset is similar. The gold/silver ratio, which shows how many ounces of silver are needed to equal the value of one ounce of gold, may help determine the relative valuation between the two metals. Some investors may consider a high ratio to be an indication that silver is undervalued, or that gold is undervalued. Conversely, a low ratio may indicate that gold is undervalued compared to silver.
