Silver Price Forecast: XAG/USD climbs above $34.00 on Middle East risks, US election uncertainty
- Silver price posts a fresh high above 34.00 on multiple tailwinds.
- The white metal gains on the fresh escalation in the Middle East war and US presidential election uncertainty.
- The Fed is expected to reduce interest rates moderately.
Silver price (XAG/USD) jumps above $34.00 in Monday’s North American session for the first time in almost 12 years. The white metal strengthens on multiple tailwinds: continuing war between Israel and Iran, and growing uncertainty over United States (US) presidential elections.
Israel vowed to retaliate against Iran’s attack on October 1, as shown by leaked documents originating from the National Security Agency (NSA) and the Geospatial Intelligence Agency (GEOIN), which was authenticated by a US official, reported by The New York Times. The scenario of escalating geopolitical tensions improves the appeal of precious metals, such as Silver, as a safe haven.
The Silver’s safe-haven appeal has also been strengthened by neck-to-neck competition between US Vice President Kamala Harris and former US President Donald Trump for presidential elections on November 5.
Meanwhile, the US Dollar (USD) bounces back strongly after a mild correction on expectations that the Federal Reserve’s (Fed) policy-easing spell will be moderate in the remainder of the year. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, aims to recapture the 11-week high around 104.00.
Going forward, investors will pay close attention to the United States (US) flash S&P Global PMI data for October, which will be published on Thursday.
Silver technical analysis
Silver price strengthens after a breakout above the horizontal resistance plotted from the May 21 high of $32.50 on a daily timeframe. Upward-sloping 20- and 50-day Exponential Moving Averages (EMAs) near $30.70 and $31.70, respectively, signals more upside ahead.
The 14-day Relative Strength Index (RSI) oscillates above 60.00, points to an active bullish momentum.
Silver daily chart
Silver FAQs
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.
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.
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.
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.
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