Silver Price Forecast: XAG/USD jumps to near $33 on US slowdown fears, US CPI eyed
- Silver price rises to near $33.00 as the US Dollar underperforms amid escalating fears of a US economic slowdown.
- Investors await the US inflation data for February.
- Hopes of a truce between Russia and Ukraine could weigh on the Silver price.
Silver price (XAG/USD) climbs to near $33.00 in European trading hours on Wednesday, the highest level seen in more than two weeks. The white metal strengthens as deepening fears of a United States (US) economic slowdown have kept the US Dollar (USD) on the backfoot. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, is slightly higher but remains close to an over four-month low of 103.35.
Investors expect the US economy is exposed to a recession as the tariff policies of President Donald Trump could weigh on consumer demand in the near term, assuming that tariffs will be inflationary. Fears of a US recession escalated after comments from US Commerce Secretary Howard Lutnick in a CBS interview on Tuesday indicated that policies by the President are worthwhile despite fears that they could lead to a recession. The appeal of precious metals, such as Silver, increases when economic uncertainty heightens.
Growing US economic risks have fuelled expectations that the Federal Reserve (Fed) could cut interest rates sooner rather than later. According to the CME FedWatch tool, there is a 42% chance that the central bank will cut interest rates in May, significantly increased from 10.4% seen a month ago. For fresh guidance on the Fed’s monetary policy outlook, investors await the US Consumer Price Index (CPI) data for February, which will be published at 12:30 GMT.
Economists expect the year-on-year headline inflation data to have risen at a slower pace of 2.9%, compared to the 3% increase seen in January. In the same period, the core CPI – which excludes volatile food and energy prices – is estimated to have decelerated to 3.2% from the prior release of 3.3%.
On the geopolitical front, growing optimism over an end of war in Ukraine has failed to weigh on the Silver price. On Tuesday, Ukraine agreed to an immediate 30-day ceasefire in a meeting with US officials in Saudi Arabia. Meanwhile, Russia wants to speak with US President Trump before commenting on the acceptability of a temporary ceasefire.
Silver technical analysis
Silver price trades in an Ascending Triangle chart pattern on a daily timeframe, which indicates indecisiveness among market participants. The horizontal resistance of the above-mentioned chart pattern is placed from the February 14 high of $33.40, while the upward-sloping border is placed from the December 31 low of $28.78.
The 20-day Exponential Moving Average (EMA) near $32.20, continues to support the Silver price.
The 14-day Relative Strength Index (RSI) climbs above 60.00. A bullish momentum would trigger if the RSI sustains above that level.
Looking down, the psychological level of $30.00 will act as key support for the Silver price. While, the October 22 high of $34.87 will be the major barrier.
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.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
