Silver price analysis: Technical indicators place XAG/USD at a crossroad

The conflicting signals regarding the US-Iran peace negotiations continue to fuel volatility in the financial markets. Earlier on Tuesday, the US stock market dropped to levels recorded 7 months ago while oil prices remained in the triple-digit zone. 

While the inflation concerns are weighing on precious metals, the bullish long-term outlook is offering support to silver price. Besides, the positive Chinese manufacturing data released earlier in the day pointed to the white metal’s steady industrial demand.  

Silver price in trade range despite positive long-term outlook

Silver price edged higher on Tuesday; holding steady above the support zone of $70. Amid the uncertainties and volatility emerging from the ongoing US-Iran war, the positive Chinese manufacturing data has bolstered its demand outlook. Granted, the white metal’s investment and industrial demand remain steady as long-term investors bet on its safe-haven appeal and tight physical supply. 

According to the figures released earlier on Tuesday, China’s manufacturing PMI rose to 50.4 in March after two consecutive months of contraction. Notably, the country’s factory activity expanded at its fastest pace in a year. 

Manufacturers in the second-largest economy have heightened their efforts to meet the orders after the Lunar New Year holiday. Besides, increased exports to Southeast Asia and Europe have offset the reduced shipments to the US. Nonetheless, investors are keen on whether the conflicts in the Middle East will disrupt the country’s industrial sector. 

Even with the positive long-term demand outlook, silver price gains are curbed by a stronger US dollar and increasing bets of a hawkish Fed. As Iran and the US offer contradicting statements on the progress of the ceasefire negotiations, crude oil prices remain in the triple-digit zone. The surge in oil prices has heightened inflation concerns and shifted investors’ expectations on major central banks’ policies. 

Notably, an environment of higher interest rates tends to be bearish for the non-yielding asset. Besides, a stronger US dollar makes silver more expensive for buyers holding foreign currencies. 

Silver price technical analysis

XAG/USD price chart | Source: TradingView

Silver price extended its previous gains on early Tuesday, even as it remains range-bound. At the time of writing, it was trading at a one-week high of $72.11 after successfully rebounding past the support zone of $70. 

On the one hand, the bulls are still in control of the market as its industrial and investment demand remains positive. However, a stronger US dollar and shift in expectations over the Fed’s interest rate decision are weighing on its short-term outlook.  

Subsequently, silver price will likely remain steady above the long-term 200-day EMA. Indeed, this is what defined its flooring when it plunged to a three-month low a week ago. Nonetheless, the formation of the bearish death-cross pattern points to curbed gains in the short term. As such, the point of convergence between the short-term 25-day EMA and the medium-term 50-day MA at $80 is a resistance level worth watching. 

In the immediate term,  it will likely continue trading within the range of between $75.85 and $67.15. Beyond that zone, the bulls will be eyeing the next target along the 25-day EMA at $76.75. On the flip side, a move below the support at $64.15 will invalidate this thesis.