Silver price (XAG/USD) surged on Friday after the Dollar Strength Index took a small breather. The precious metal plunged 4.5% during the week. However, after a rejection from the 200-day moving average, the price tumbled. At the time of writing, the precious metal was down 0.94% and changed hands at $22.37.
The sharp bounce in the Silver price per ounce during the London session can be attributed to the small pullback in the DXY. The dollar strength index fell below 106 points. However, the index rebounded strongly, causing a sell-off in precious metals.
On Thursday, the US reported a 2.1% Q2 GDP, which was less than the 2.2% expected by analysts. As a result, DXY slid by 0.5% after the news. Since DXY and precious metals like Gold and Silver have an inverse correlation, Silver showed a rebound.
Analysts expect Gold to experience a significant fall in the coming weeks. They listed the Fed’s decision to keep the rates high as the reason for the plunge. However, Silver price is showing relative strength compared to Gold, which shows that in case of a correction in the DXY index, Silver may rebound very strongly.
A look at the XAG/USD chart reveals the price attempted to break above the upward trendline but failed to do so. As mentioned earlier, the price of the safe-haven asset also retested the 200 MA before plunging 4.64% right after.
My Silver price prediction will turn bullish only if the price gains strength above the 200 MA level, which lies at $23.4. With the US Fed keeping the rates high, the outlook is at risk of being bearish. It is very critical for the bulls to hold the $22.1-$22.5 support level to avoid another bearish leg.
This post was last modified on Sep 29, 2023, 17:35 BST 17:35