Silver Price Forecast: XAG/USD remains steady around $32.50 ahead of US election

• Silver price maintains its position as traders adopt caution due to increased uncertainty surrounding the US election results.
• The opinion polls indicate that former President Trump and Vice President Harris are nearly tied.
• Silver demand may increase due to rising expectations for additional stimulus measures from China.

Silver price (XAG/USD) maintains its position around 32.50 during Asian trading hours on Tuesday as traders adopt caution ahead of the US presidential election. However, the heightened uncertainty surrounding the election has led to increased demand for safe-haven assets like Silver.

The risk aversion sentiment has been amplified by speculation that a potential presidency under Republican nominee Donald Trump could lead to higher inflation, given his pledge to significantly raise trade tariffs. This has prompted investors to seek safe-haven assets as a hedge against long-term inflation risks.

However, the opinion polls indicate that former President Donald Trump and Vice President Kamala Harris are nearly tied. The final outcome may remain unknown for several days following Tuesday’s vote. Both Trump and Harris expressed confidence in their chances as they campaigned across Pennsylvania on the last frantic day of this exceptionally close presidential race.

US Federal Reserve’s (Fed) policy decision will be eyed on Thursday. Markets expect a modest 25 basis point rate cut this week. The CME FedWatch Tool shows a 99.5% probability of a quarter-point rate cut by the Fed in November. This could provide support for Silver as lower interest rates reduce the opportunity cost of holding non-interest-bearing assets.

Expectations for additional stimulus measures from China could bolster Silver demand as the Standing Committee of the National People's Congress (NPC) holds a five-day meeting from November 4 to 8. Chinese authorities are anticipated to approve a potential stimulus package exceeding 10 trillion yuan to support the country's economy. Given China’s position as one of the world’s largest manufacturing hubs for electronics, solar panels, and automotive components, this could lead to increased demand for Silver.

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.