The current market conditions are less favorable for silver than for gold. The white metal is widely used in industry, and the slowdown in the global economy is creating challenges for the XAGUSD. However, market analysts remain optimistic. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Highlights and key points
- The start of the Fed’s monetary expansion is good news for XAGUSD.
- The global economic slowdown may reduce the demand for silver.
- Silver needs another boom, as in 2011, to grow steadily.
- The metal may soar to $31.4 and $32.7 per ounce.
Monthly fundamental forecast for silver
Will silver be able to catch up with gold, which has recently seen a significant increase in value? The precious metals sector is experiencing a period of growth and expansion, with the leader in the sector breaking records and bulls making gains in the XAGUSD market. Historically, the white metal has trailed gold, its performance has consistently been shaped by the ebb and flow of the economic cycle. The deceleration of the world’s leading economies, spearheaded by the US, is not an auspicious development for silver.
From January to May, the white metal demonstrated resilience against gold due to the unexpected resilience of the US economy to the Fed’s monetary tightening in 2022-2023. A substantial proportion of the demand for silver is driven by industrial applications, and the positive performance of the manufacturing sector has provided support to XAGUSD bulls. This is particularly relevant given the Silver Institute’s assertion that the market is currently experiencing its second-largest deficit in two decades. In such circumstances, the growth in demand has naturally resulted in higher prices.
Since the summer, markets have seen a shift in dynamics. The US economy exhibited increasing signs of cooling, and the Black Monday shockwaves due to recession fears drove silver quotes back to a three-month low. It was only after recession fears gave way to market optimism that XAGUSD bulls returned to the market.
Despite the current gold/silver ratio of 85, which is above its 20-year average of 68, it will be challenging to reach that level again. The last time the ratio reached this level was during the pandemic when the Fed’s aggressive monetary expansion led to a global economic recovery. Conversely, the ratio fell below 40 during XAGUSD’s record highs in 2011, driven by surging demand for solar panels.
Silver and gold performance
Source: Kitco.
The markets believe that history will repeat itself. Samsung’s new batteries, which utilize a significant amount of silver, provide electric vehicles with an impressive range of up to 600 miles, a 20-year service life, and a rapid 9-minute charge. With global car production at 80 million units per year, the potential demand for silver would increase to 16,000 tons if 20% of these vehicles were to use Samsung batteries. This constitutes a substantial portion of the 25,000-unit supply. In light of other sources of demand, including solar panels, and the market deficit, it is reasonable to anticipate a new boom and the XAGUSD reaching record highs.
A strong bull market is a distinct possibility. The current market conditions are challenging, with the slowing US economy and China’s ongoing economic difficulties creating an unfavorable environment for silver. The potential return of Donald Trump to the White House with his proposed tariffs and trade wars represents a further risk. However, the emergence of new technologies and the consistently high demand for electric cars can support the white metal.
Monthly trading plan for silver
As long as the XAGUSD is trading above $29.35 per ounce, one can purchase silver with targets at $31.4 and $32.7.
Price chart of XAGUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.