tradingkey.logo

Silver Price Forecast: XAG/USD faces bloodbath as fears of global slowdown intensify

FXStreetAug 5, 2024 12:32 PM

  • Silver price faces an intense sell-off below $28.00 as broadening demand concerns.


  • Weak US Employment and Manufacturing PMI prompted risks of global slowdown.


  • US bond yields weaken as investors see the Fed delivering a bulk rate-cut decision.



Silver price (XAG/USD) is down by more than 5%, skids below $28.00 in Monday’s European session. The white metal nosedives to an almost three-month low as fears of a global economic slowdown has intensified after a string of United States (US) economy data indicated that the nation is moving towards a recession.


Recent US data showed signs of slower labor demand and sheer weakness in the manufacturing sector. The US Unemployment Rate rose to its highest since November 2021 at 4.3%. Meanwhile, the Manufacturing PMI for July contracted at a faster pace to 46.8. The demand of the Silver as an metal with application in various industries, such as: Electric Vehicles, renewable energy, and wires and cables etc.


Investors have remained concerned over the Silver’s demand due to China’s economic vulnerability. The Chinese economy is going though a rough phase due to weak demand conditions in the domestic and the overseas market.


Meanwhile, a sharp decline in US bond yields and the US Dollar (USD) due to growing speculation that the Federal Reserve (Fed) will deliver a bulk rate-cut in its September meeting fails to lift the Silver price. 10-year US Treasury yields plunge to near 3.67%. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, plummet to more than annual low near 102.60.



Silver technical analysis


Silver price weakens after discovering strong selling interest near the prior breakdown zone around $28.60. The asset has declined to near the 200-day Exponential Moving Average (EMA), which trades around $26.85, suggesting that the overall trend is uncertain.


The 14-period Relative Strength Index (RSI) slips into the 20.00-40.00 range, indicating that the overall momentum is bearish.


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.

Reviewed byTony
Disclaimer: The content of this article solely represents the author's personal opinions and does not reflect the official stance of Tradingkey. It should not be considered as investment advice. The article is intended for reference purposes only, and readers should not base any investment decisions solely on its content. Tradingkey bears no responsibility for any trading outcomes resulting from reliance on this article. Furthermore, Tradingkey cannot guarantee the accuracy of the article's content. Before making any investment decisions, it is advisable to consult an independent financial advisor to fully understand the associated risks.

Related Instruments

tradingkey.logo
tradingkey.logo
Intraday Data provided by Refinitiv and subject to terms of use. Historical and current end-of-day data provided by Refinitiv. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.
* References, analysis, and trading strategies are provided by the third-party provider, Trading Central, and the point of view is based on the independent assessment and judgement of the analyst, without considering the investment objectives and financial situation of the investors.
Risk Warning: Our Website and Mobile App provides only general information on certain investment products. Finsights does not provide, and the provision of such information must not be construed as Finsights providing, financial advice or recommendation for any investment product.
Investment products are subject to significant investment risks, including the possible loss of the principal amount invested and may not be suitable for everyone. Past performance of investment products is not indicative of their future performance.
Finsights may allow third party advertisers or affiliates to place or deliver advertisements on our Website or Mobile App or any part thereof and may be compensated by them based on your interaction with the advertisements.
© Copyright: FINSIGHTS MEDIA PTE. LTD. All Rights Reserved.