Silver Price Prediction: XAGUSD Needs to Stay Above Critical Support to Move Up

Summary:
• Silver price has declined in recent days as more investors favor safe haven gold in the wake of likely Fed interest rate cuts.

Silver price returned to the upside on Thursday, gaining 0.2 percent in the intraday session to trade at $30.37 per ounce. While its rich cousin, gold, has been on an upward rally in recent days to register new record highs this week, silver has been nosediving, and is on course to register its second successive weekly loss as of this writing. That would be the first such loss-making run by the grey metal since late April, and a stay above the $30 psychological support mark is critical to a potential recovery of recent losses.

While silver is a precious metal same as gold, its use in industrial manufacturing and processing exposes it to forces beyond safe haven investment. In the case of the pressure originates from China’s recent soft economic data. The world’s second-largest economy, and a top silver consumer saw its economic growth rate decline in the April-June quarter to 4.7 percent from a growth rate of 5.3 percent in the first quarter of the year. That also fell short of the Chinese government target of 5 percent.

The Communist Party closed its twice–a–decade Third Plenum meeting on Thursday with scanty details on the country’s economic policies that could have far-reaching implications for the world for the next ten years. The forum is traditionally used as a platform for defining the Communist Party’s approach to managing the economy, and analysts hope to get cues from the party’s stand on China’s metal consumption.

As markets wait for clearer standpoints from the Third Plenum in the coming days, the divergence between gold and silver prices could increase, as the former safe haven strength could prove more attractive amidst a weakening US dollar.

Technical analysis

My silver price prediction shows that the momentum on silver price favours the upside if the buyers keep the price above the 30.50 pivot mark. The upside movement will likely meet the first resistance at 30.61, but extended control by the buyers could take XAGUSD further up to test 30.75. Conversely, a move below 30.50 could swing control to the sellers. In that case, the first support could come at 30.32, with a break below it invalidating the upside narrative. Also, control by the sellers at that point could extend the downside to test 30.16.