Silver Price Forecast: XAG/USD recovers to near $30.50 as Trump’s tariff threats keep outlook intact
- Silver price bounces back to near $30.50 as its outlook remains firm on Donald Trump’s tariff fears.
- Donald Trump reiterated that he will impose 25% tariffs on North American peers and 100% on BRICS.
- Investors await the US PCE inflation data for December.
Silver price (XAG/USD) recovers a majority of intraday losses and rebounds to near $30.50 in Friday’s European session. The white metal bounces back strongly as its outlook remains firm amid fears that United States (US) President Donald Trump will impose 25% tariffs on Canada and Mexico on Saturday for allowing illegal immigrants and the deadly opioid fentanyl enter into the economy. Such a scenario could lead to a trade war, which heightens geopolitical uncertainty, which is favorable for precious metals, like Silver.
Donald Trump has also threatened to implement 100% tariffs on the BRICS for attempting to create a new currency to diminish their reliance on the US Dollar. On his social media platform, Truth Social, on Thursday, Trump said, "There is no chance that the BRICS will replace the U.S. Dollar in International Trade or anywhere else, and any Country that tries should say hello to Tariffs and goodbye to America."
Meanwhile, the US Dollar’s (USD) appeal has also increased on Trump’s tariff threats but is trading subduedly in European trading hours ahead of the US Personal Consumption Expenditure Price Index (PCE) data for December, which will be published at 13:30 GMT. Economists estimate the core PCE inflation to have risen by 0.2% against 0.1% growth seen in November on month-on-month, with annual figures growing steadily by 2.8%.
Signs of persistent inflationary pressures would boost market expectations that the Federal Reserve (Fed) will keep interest rates at their current levels for a lengthy period. On Wednesday, the Fed left its key borrowing rates steady at 4.25%- 4.50% and guided that the central bank will remain in the waiting mode until it sees real progress in inflation or some weakness in the labor market.
Silver technical analysis
Silver price strengthens on a decisive break above the upward-sloping trendline around $30.85, which is plotted from the 29 February 2024 low of $22.30 on a daily timeframe. The near-term outlook of the white metal remains firm as it holds the 20-day Exponential Moving Average (EMA), which trades around $30.57.
The 14-day Relative Strength Index (RSI) climbs above 60.00. A fresh bullish momentum would trigger if the RSI manages to hold above 60.00.
Looking down, the January 27 low of $29.70 will act as a key support zone for the Silver price. On the upside, the December 12 high of $32.33 will act as key resistance.
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.
