Silver does not enjoy the same advantage as gold, which is purchased in bullion form by central banks, but it does have a strong base of retail investors ready to enter the market. Demand for physical silver is also growing in India. Let’s examine these factors and develop a trading plan for the XAG/USD.
The article covers the following subjects:
Major Takeaways
- Silver continues to lag behind gold.
- Indian imports are gradually increasing.
- Waning interest in AI could support the precious metal.
- Long positions on the XAG/USD can be considered if the price breaks through the 66.8 resistance level.
Weekly Fundamental Forecast for Silver
Silver remains in gold’s shadow, with gold’s surge above $4,400 per ounce capturing the attention of investors worldwide. However, the two precious metals share many of the same drivers, and the lagging performance of XAG/USD makes silver worth a closer look. Because the silver market is smaller, the metal can often rise faster than gold once momentum builds. Catching that shift early could offer significant profit potential.
The main driver behind silver’s rally toward two-month highs has been investor disappointment—both with Kevin Warsh, who appears intent on fighting inflation through market forces rather than direct policy action, and with US macroeconomic data. Weak employment, inflation, and retail sales figures point to a cooling US economy, reducing the likelihood of Fed tightening, pushing Treasury yields lower, weakening the dollar, and creating a favorable backdrop for XAG/USD.
While silver lacks one of gold’s key growth drivers—central-bank purchases of bullion—it benefits from strong demand for physical metal and a large base of retail investors waiting for the right opportunity to enter the market. These factors could provide further support for the XAG/USD bulls.
India Silver Premium
Source: Bloomberg.
In May, India introduced a licensing system for precious-metal imports to reduce its current-account deficit and preserve foreign-exchange reserves. The move significantly reduced silver imports, which fell to just 29 tons in June from 747 tons in January. However, the new system is gradually taking effect, and imports rebounded to nearly 90 tons in August. Rising demand is also reflected in premiums, which have fallen to around $4 per ounce. These premiums are encouraging silver flows from the rest of the world into Asia and represent one of the bullish factors for XAG/USD quotes.
According to Citadel Securities, retail investors are also driving silver’s price higher. The consolidation in silver prices during June and July redirected their capital toward stock markets, where demand for AI stocks remains strong. Nevertheless, the end of the US corporate earnings season could reduce support for Big Tech. As investors turn their attention to other markets, any renewed momentum in the XAG/USD rally could signal that it is time to join the bulls.
The outlook for precious metals remains solid. They are unlikely to suffer significantly from a further escalation of the conflict in the Middle East, as geopolitical tensions combined with a slowing US economy could create a favorable stagflationary environment. Gold is likely to benefit more from such conditions, but silver could still deliver a pleasant surprise, despite its greater dependence on industrial demand.
Weekly Trading Plan for XAG/USD
Against this backdrop, if silver pierces the 66.8 resistance level, long positions formed on the XAG/USD in late June can be increased.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAGUSD in real time mode
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