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

• 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.