Silver Price Forecast: XAG/USD extends decline near $29.00 amid China’s demand concerns

Silver price trades in the negative territory around $29.00 for the fifth straight day on Tuesday, down 0.35% on the day.
China’s demand concerns exert some selling pressure on the XAG/USD.
The Fed's potential interest rate cuts and political uncertainty might cap Silver’s downside.

Lallalit Srijandorn FXStreet

Silver price (XAG/USD) extends downside near $29.00 during the Asian session on Tuesday. The white metal edges lower amid a slowing Chinese economy. Investors will take more cues from the key US economic data later this week, including the first reading of the US S&P Global Purchasing Managers Index (PMI) for July, Gross Domestic Product (GDP) for the second quarter and the Personal Consumption Expenditures Price Index (PCE) data for June.

Industrial demand concerns from China’s economic slowdown continue to undermine Silver price in the previous sessions. The Chinese GDP for Q2 was weaker-than-expected and Retail Sales increased at the slowest pace since 2022. It’s worth noting that China is a major consumer of industrial metals, and China’s economic slowdown could weigh on the Silver price.

On the other hand, the rising bets on Federal Reserve (Fed) rate cuts in September might lift the white metal. New York Fed President John Williams and Fed Governor Christopher Waller noted that the Fed is getting “closer” to where it wants to be in terms of rate cuts.

According to the CME FedWatch Tool, traders in the Fed Funds Futures markets have fully priced in rate cuts in September, with at least two quarter-point cuts in 2024. Furthermore, political uncertainty after US President Joe Biden’s withdrawal from the 2024 election might support Silver for the time being.

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

AUD/USD turns south toward 0.6900 as USD firms up

AUD/USD sees fresh selling and drops toward 0.6900 in late Asian trading on Monday, as renewed US Dollar strength weighs on the pair amid lingering Middle East and Russia-Ukraine geopolitical tensions. Focus remains on Oil prices, Treasury bond yields, and RBA expectations for fresh trading impetus in the major.

USD/JPY retakes 158.00 amid hawkish BoJ bets, firmer USD

USD/JPY erases losses and retakes 158.00 in the Asian session on Monday, trading within a one-week-old range. Geopolitical uncertainty continues to underpin the US Dollar, despite fading Fed rate hike hopes, supporting the pair's rebound. However, further upside could be capped by hawkish BoJ expectations and looming intervention risks that could support the Japanese Yen.

Gold flirts with $4,100, four-day lows

Gold adds to Friday’s losses and comes closer to the key $4,100 mark per troy ounce at the beginning of the week. The yellow metal’s retracement comes in response to the persistent advance in the US Dollar in combination with the resurgence of the upside momentum in US Treasury yields across the curve.

Crypto Today: Bitcoin rally slows while Ethereum and XRP extend recovery amid slowing ETF inflows

Bitcoin is narrowly consolidating while trading above $86,000 at the time of writing on Monday. Altcoins, on the other hand, show a positive outlook, with Ethereum edging higher above $2,700 while Ripple steadies above $1.52.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.