Silver Price (XAG/USD) has been on a steady uptrend for the past five days, reaching a two-week high of $23.50 during the mid-Asian session on Wednesday. The bright metal has broken above the 200-DMA and is now testing the 50-DMA as a key resistance level. The bullish momentum is supported by positive technical indicators and market sentiment.
Silver Price Benefits from Technical Breakout and MACD Signals
The XAG/USD pair has managed to clear the 200-DMA, which was acting as a strong barrier for the past two weeks. The 200-DMA is currently at $23.30 and serves as a near-term support for the silver bulls. The pair has also bounced back from the 61.8% Fibonacci retracement level of the March–May rally, which is also known as the “Golden Fibonacci Ratio”. This level is at $22.30 and represents a major support for the long-term trend.
The MACD indicator is also showing bullish signals, as it has crossed above the zero line and the signal line. The MACD histogram is also increasing in positive territory, indicating growing momentum for the silver buyers. The RSI (14) indicator is also in favor of the bulls, as it is above the 50 level and rising.
Silver Price Faces Resistance from 50-DMA and Downward Trendline
Despite the bullish factors, the silver price still faces some challenges ahead, as it approaches the 50-DMA and a downward trendline from early May. The 50-DMA is at $23.50 and coincides with the two-week high of the pair. The downward trendline is at $24.90 and connects the lower highs of the pair since May. These levels act as potential resistance for the silver price and could limit its further upside.
The silver bulls need to overcome these hurdles to extend their rally toward the next targets at $24.05 and $24.90, which are the late July’s swing low and the early May’s swing high, respectively. On the other hand, the silver bears need to break below the 200-DMA and the “Golden Fibonacci Ratio” to regain control and push the price lower toward $23.00 and $22.30, which are the 50% and 61.8% Fibonacci retracement levels, respectively.
Silver Price Influenced by Market Sentiment and Key Events
Fundamentally, the silver price is also influenced by the market sentiment and key events that affect the demand and supply of the precious metal. Silver is often seen as a safe-haven asset that benefits from risk aversion and uncertainty in the global markets. Silver is also used as an industrial metal that reflects the economic activity and growth prospects of various sectors.
The market sentiment is currently cautious, as investors await the preliminary readings of the August month Purchasing Managers Indexes (PMIs) from major economies, which will indicate the health of the manufacturing and services sectors amid the COVID-19 pandemic and its variants. The PMIs are expected to show a mixed picture, with some countries reporting expansion and others contraction.
The market sentiment is also affected by the annual Jackson Hole Symposium event, which will take place from August 24–26. This event will feature speeches from top central bankers, including Fed Chair Jerome Powell, ECB President Christine Lagarde, and Bank of England Governor Andrew Bailey. The market participants will look for clues on their monetary policy outlooks, especially on their tapering plans and interest rate decisions.
The silver price could benefit from any signs of dovishness or uncertainty from these central bankers, as it would imply more stimulus and lower interest rates for longer, which are supportive for non-yielding assets like silver. Conversely, any hints of hawkishness or confidence from these central bankers could weigh on the silver price, as it would suggest less stimulus and higher interest rates sooner, which are negative for non-yielding assets like silver.
