Silver Price Forecast: Finds Temporary Support at Fibonacci Level, RSI Oversold

• Silver is in a short-term downtrend after reversing at the late August high.
• The price has found support at a key Fibonacci retracement and is oversold, indicating the risk of a correction.

Silver (XAG/USD) has established a sequence of descending peaks and troughs on the 4-hour chart since reversing from the August 26 high. This suggests that the precious metal is in a new short-term downtrend, and since “the trend is your friend,” it will continue to fall.

Silver 4 hour chart

Silver is currently finding support at a key level: the 0.618 Fibonacci ratio retracement of the August rally.

The Relative Strength Index (RSI) momentum indicator has fallen into oversold territory, and although it is shown breaking out of oversold territory on the current bar, it is not possible to say whether it will close that way until the 4-hour period is over. If it breaks out of oversold territory, it will give a buy signal and, together with the Fibonacci retracement support, could indicate a temporary bottom in the downtrend.

If an upside correction develops, it is likely to find resistance between $28.28 (the .50 Fib retracement) and $28.33 (September 2 swing low). Since the trend is bearish, it would be expected to resume its decline thereafter.

In any case, a break below $27.71 (September 3 low) would produce a lower low and extend the downtrend. The next target is the August low at $26.41.

The trend on the medium and long term charts is unclear, possibly sideways, indicating little directional bias on the higher time frames.