Silver Prices Forecast: XAG/USD Hits Two-Week High Amid Global Tensions

Silver Market Surge

In a notable display of strength, silver prices have soared to a two-week high, testing the significant level of $25.91 set on December 3. This rally, extending over four consecutive days, reflects a trend also evident in the gold market, where bullion marked its largest monthly increase in March since July 2020. Driven by momentum-following funds, this surge highlights the growing investor interest in precious metals as safe-haven assets.

At 12:56 GMT, XAG/USD is trading $25.63, up $0.55 or +2.19%.

Market Fundamentals

Silver’s recent ascent is remarkable, given the array of economic challenges it faces. The U.S. dollar, bolstered by strong economic data, has reached a five-month high, impacting the likelihood of a June interest rate cut. This is accompanied by a rise in long-term U.S. Treasury yields, which traditionally would deter investments in silver.

Moreover, the current period typically sees lower seasonal demand for silver and gold, and there’s a noted increase in European investors selling off physical bullion. The recent uplift in U.S. manufacturing is also influencing market expectations around Federal Reserve actions, thereby affecting the dollar and, in turn, silver prices.

Adding to the complex financial backdrop are escalating geopolitical tensions. The recent intensification of conflicts in the Middle East, alongside a Ukrainian drone strike on a Russian oil refinery, underlines the role of silver as a safe-haven asset.

The uncertainty stemming from Iran’s pledge of retaliation for an airstrike in Damascus and the potential escalation of the Israel-Hamas conflict further emphasizes silver’s status as a refuge for investors during times of geopolitical instability.

Short-term Forecast

Despite these challenges, the short-term outlook for silver is bullish. The metal’s resilience amid traditional economic headwinds and its recognition as a safe-haven in times of geopolitical turmoil are driving continued investor interest. The unfolding global economic situation, especially Federal Reserve policy decisions, will be critical in guiding the direction of silver prices.

Silver is in a position to challenge the March 21 high at $25.78. Given the strengthening upsid momentum, overtaking this level could trigger a further surge into the December top at $25.91.

The market is being underpinned over the short-term by static support at $24.49 and a swing bottom at $24.32. Both are the first line of defense before the intermediate or 50-day moving average at $23.56 and the 200-day moving average at $23.39.