Silver Price Forecast: XAG/USD remains on the defensive below $30.50 ahead of US Retail Sales data

• Silver price remains under pressure near $30.35 in Friday’s early European session. 
• Trump trades are likely to support the Greenback and undermine the USD-denominated Silver price. 
• Global silver demand in 2024 could help limit the XAG/USD’s losses. 

Silver price (XAG/USD) trades in negative territory around $30.35 on Friday during the early European session. The white metal remains vulnerable amid the stronger US Dollar (USD). Traders await the release of the US October Retail Sales report on Friday for fresh impetus. The Fedspeak will be closely monitored as it might offer some hints about the US interest rate outlook. 

Donald Trump's victory in last week's US presidential election sparked expectations of potentially inflationary tariffs and other measures by his incoming administration, boosting the Greenback. Meanwhile, the US Dollar Index (DXY), a measure of the value of the USD against a basket of six currencies, currently trades near 106.80 after hitting a fresh year-to-date high near 107.05 in the previous session. The 10-year US Treasury bond hit the highest since start of July at 4.48%. The renewed USD demand could undermine the USD-denominated Silver as it makes the white metal more expensive in other currencies, dampening demand. 

China's National People's Congress (NPC) meeting last week failed to deliver the immediate fiscal stimulus that investors were expecting. The concerns about sluggish demand could weigh on the Silver price as China is the world's major importer of silver. 

On the other hand, record-high industrial demand for silver might support the white metal in the near term. According to the Silver Institute and consultancy Metals Focus, demand for silver across industrial applications is expected to increase 7% YoY in 2024, reaching 700 million ounces (Moz). Additionally, analysts expect the global silver market to show a physical deficit of around 182 million ounces in 2024, marking the fourth consecutive year of shortfall.

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.