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Silver Price Forecast: Will XAG/USD Consolidate Further?

Silver Price Forecast: Will XAG/USD Consolidate Further?

2020-01-17 20:00:00
Peter Hanks, Junior Analyst
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Silver (XAG/USD) Technical Outlook:

  • Silver has been unable to hold above resistance at $18.35
  • The fundamental drivers of recent bullishness have subsided, so XAG/USD could be vulnerable to further consolidation
  • How to Trade Silver

Silver Price Forecast: Will XAG/USD Consolidate Further?

Silver has enjoyed an encouraging start to the year, receiving a boost from geopolitical tensions and the Fed’s balance sheet expansion. Now, however, these drivers have subsided or taken a backseat as silver trades narrowly beneath technical resistance. Without a clear fundamental catalyst, breaching the topside barrier could be too much too soon without a surprise uptick in volatility.

To be sure, it seems as though the market is overdue for volatility after weeks of a subdued VIX, but banking on an immediate resurrection in volatility is a strategy that requires too much hope to be sound. With that in mind, silver may be headed lower over the shorter term as bulls await further catalysts and the metal looks to consolidate gains from December and early January.

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Silver (XAG/USD) Price Chart: Daily Time Frame (July 2019 – January 2020) (Chart 1)

silver (XAG) price chart

Chart created with TradingView

With that in mind, initial support will look to buoy price around $17.50. Offering a horizontal level of support, the area will also provide the 50-day simple moving average. If bearishness persists, secondary support will be offered at the $16.50 level which coincidentally coincides with the 200-day moving average. Enjoying a bounty of support, it looks as though silver may eventually turn higher in the longer-term from a technical perspective.

Silver BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -3% 1% -3%
Weekly 6% 103% 12%
What does it mean for price action?
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Given the fact that the Fed has shown few signs of slowing its balance sheet expansion, a fundamental tailwind could remain as well. Consequently, shorter-term consolidation could be a healthy development for XAG in pursuit of a longer-term continuation higher. In the meantime, follow @PeterHanksFX on Twitter for updates.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more:Silver Price Forecast: Can XAG/USD Avoid a Pullback?

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