Silver Price Forecast: XAG/USD surges to near $32 on dismal market sentiment
- Silver price climbs to near $32.00 as its safe-haven demand has improved amid a sour market mood.
- The white metal has also gained at the US Yields’ cost.
- Traders expect the Fed to cut interest rates by 50 bps in the remainder of the year.
Silver price (XAG/USD) jumps to near the crucial resistance of $32.00 in Wednesday’s North American. The white metal gains as investors’ risk appetite has diminished due to growing speculation that former US President Donald Trump will win the upcoming presidential elections. The Trump 2.O administration is expected to result in an increase in tariffs on imports of various goods.
S&P 500 futures trade cautiously in the North American session. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains around 103.40.
Meanwhile, a slight decline in US Treasury yields has also strengthened the Silver price. 10-year US Treasury yields drop to near a weekly low around 4%. Lower yields on interest-bearing assets reduce the opportunity cost of holding an investment in non-yielding assets, such as Silver.
Going forward, the Silver price will be guided by market expectations for the Federal Reserve’s (Fed) interest rate outlook. According to the CME FedWatch tool, traders see the Fed reducing interest rates by 50 basis points (bps) to 4.25%-4.50%, suggesting that the central bank will cut interest rates by 25 bps in November and December meetings.
On the economic data front, investors will pay close attention to the United States (US) monthly Retail Sales data for September, a key measure of consumer spending that drives price pressures, which will be published on Thursday. Economists expect the Retail Sales to have grown by 0.3%.
Silver technical analysis
Silver price strives to reclaim the decade-high of $33.00. Upward-sloping 20- and 50- Exponential Moving Averages (EMAs) near $31.20 and $30.40, respectively, suggest a strong uptrend.
The 14-day Relative Strength Index (RSI) approaches 60.00. A decisive break above the same would activate a bullish momentum.
Silver daily chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.