- Silver is testing a pivotal support zone.
- If this level holds, it could present a dip-buying opportunity for traders.
- However, a breach of that level could signal further downside.
- For less than $8 a month, InvestingPro's Fair Value tool helps you find which stocks to hold and which to dump at the click of a button.
Silver's rally earlier this year fizzled out in the summer, and it's been on a downward slide ever since.
While gold has been holding its ground after the latest surge, the grey metal has been struggling. The two precious metals used to move in tandem, but that changed in July.
Silver took a bigger hit in August and decoupled from gold as a result, mainly because of recession fears.
When the economy isn't doing well, people tend to buy gold as a safe haven. But silver, being used more in industry, is more sensitive to economic downturns.
As recession worries eased in August, silver prices rebounded. However, the grey metal hit a resistance level at $30 and has been forming lower highs, indicating that it's still in a technical correction phase.
Looking at the daily chart, the price has been stuck in a falling channel since late May. It recently tested a key support level at $28.5 after being rejected from the channel's upper band.
Silver Nearing Dip-Buying Level
Silver is currently testing a crucial support level at $28.5, which aligns with the middle band of its falling channel and the 0.382 Fibonacci retracement of its first-half uptrend. This makes $28.5 a critical point for determining the short-term direction of the metal.
Technically, XAG/USD is under selling pressure. Short-term EMA values have turned downward, and the price has dipped below the 3-month EMA, signaling a bearish outlook.
After being rejected at $30, the Stochastic RSI sharply reversed, highlighting the intensity of the selling pressure. If silver sees daily closes below $28.5, this could trigger a pullback to $26.8, coinciding with the channel's lower boundary.
However, if silver finds support at $28.5, investors might view the recent downturn as a buying opportunity, potentially reversing the trend.
Should this happen, the $29.6-$30 range will likely be tested as a resistance zone again. A break above this range could mark the beginning of the end of the correction phase.
If silver closes above $30 on a weekly basis, the next resistance levels to watch are $31.25 and $32.5, with a possible rally extending to $34-$36 if the uptrend gains momentum.
How the Global Economic Cycle Could Impact Silver Prices
Globally, if central banks in developed economies, particularly the Fed, begin cutting interest rates, demand for silver—a non-yielding asset—could rise as US dollar yields decline.
Additionally, if the U.S. economy avoids a recession and continues to grow, increased industrial demand for silver could also boost its price.
Conversely, silver might see limited safe-haven demand compared to gold if dollar yields drop, as gold could attract more interest. In summary, the $28.5 level remains a decisive factor in determining silver's short-term direction.
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