Silver Price Forecast: XAG/USD trades near $34.50, upside seems possible due to caution

Silver price may regain its ground due to market caution ahead of the US presidential election.
Silver prices faced challenges as the Israeli PM Netanyahu may discuss a diplomatic resolution to the war in Lebanon.
The dollar-denominated Silver received support from a lower US dollar and Treasury yields ahead of US data releases this week.

Akhtar Faruqui FXStreet

Silver prices (XAG/USD) dips slightly to around $34.30 during the Asian trading hours on Wednesday. However, Silver gained over 2% on Tuesday amid ongoing uncertainty surrounding the US presidential election.

A three-day poll conducted by Reuters/Ipsos, which concluded on Sunday and was released on Tuesday, indicated that the race is essentially tied as the November 5 election approaches. Vice President Kamala Harris, the Democratic candidate, has seen her lead over Republican nominee Donald Trump narrow to just one percentage point, with 44% support compared to Trump's 43%.

Silver prices might have encountered difficulties due to safe-haven flows, following an Axios reporter post on X that Israeli Prime Minister Benjamin Netanyahu is set to meet with various ministers and military and intelligence leaders to discuss a diplomatic resolution to the war in Lebanon, according to Reuters.

The dollar-denominated commodity, like Silver, typically benefits from a weaker US dollar and lower Treasury yields as traders exercise caution ahead of significant US economic data releases this week. A declining US dollar makes Silver more affordable for foreign buyers, which can boost demand for the precious metal.

The preliminary US Q3 Gross Domestic Product (GDP) figures and October's ADP Employment Change are set to be released on Wednesday. Additionally, US PCE inflation and Nonfarm Payrolls will be closely monitored on Thursday and Friday, respectively.

Investors are also anticipating the upcoming meeting of China's parliament, scheduled for November 4-8, as reported by state media on Friday. There is considerable interest in the gathering of the standing committee of the National People’s Congress, which is expected to provide updates on potential fiscal stimulus measures.

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

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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