Silver Price Forecast: XAG/USD trades firmly above $47 as Washington closes down

Silver price clings to gains above $47 amid the US government shutdown.
US Vice President Vance warns of massive layoffs if the government remains shut down for longer.
The US private sector labor force saw a reduction of 32K employees in September.

Sagar Dua FXStreet

Silver price (XAG/USD) holds onto gains near the all-time high around $47.80 during the Asian trading session on Thursday. The white metal posted a fresh all-time high on Wednesday as funding to the United States (US) government stopped after the short-term funding bill failed to achieve a majority in the House of Senate on Tuesday.

The US government shutdown has increased the appeal of safe-haven assets, such as Silver.

US Vice President (VP) JD Vance has warned that the White House would need to resort to lay-offs if the shutdown remains for more than a few days, Reuters reported.

Such a scenario could boost hopes of more interest rate cuts by the Federal Reserve (Fed) to tackle a weak labour market outlook.

Meanwhile, the job demand in the private sector has also worsened due to new economic policies announced by US President Donald Trump. On Wednesday, the ADP reported that the private sector removed 32K payrolled workers in September, while it was expected to have hired 50K fresh job-seekers. Additionally, the August ADP Employment data was also revised from an addition of 54K workers to a reduction of 3K employees.

In Thursday’s session, the Initial Jobless Claims data for the week ending September 27 is unlikely to be released due to the US government shutdown, a scenario that will force Fed officials to look for other private sources to get cues on the current status of individuals seeking jobless benefits.

Silver technical analysis

Silver price oscillates inside the Wednesday’s range around $47.25, remains close to its all-time high of $47.80 posted the same day. Upward-sloping 20-day Exponential Moving Average (EMA) around $44 suggests that the near-term trend remains bullish.

The 14-day Relative Strength Index (RSI) trades inside the bullish range of 60.00-80.00, indicating a strong bullish momentum.

Looking up, the Silver price could extend its upside to near the psychological level of $50.00. On the downside, the 20-day EMA will act as key support.

Silver daily chart

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

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.

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