Silver Prices Forecast: XAG/USD Set to Outshine Gold, Driven by Investor Demand

James Hyerczyk
Published: Apr 10, 2024, 11:03 GMT+00:00

Key Points:

  • Silver prices resilient; central banks, geopolitical tensions influencing market.
  • Anticipated surge in silver's investment demand could eclipse gold's performance.
  • Upcoming US CPI data crucial for Federal Reserve's interest rate decisions.
Silver Prices Forecast

In this article:

Rising Silver Prices Amid Global Tensions

Silver prices are lower but stable on Wednesday, hovering near multi-year highs set in the previous session. This stability is attributed to a mix of emerging inflationary risks and ongoing geopolitical tensions, offering a safe haven for investors.

The divergence of silver from its traditional market drivers is notable, with central banks in emerging markets stockpiling silver to mitigate risk. Additionally, fluctuations in the Chinese currency, industrial demand and the emergence of inflation risks are pivotal factors influencing the current price trends.

At 10:49 GMT, XAG/USD is trading $28.13, down $0.02 or -0.07%.

Investment Demand and Momentum

There is a growing anticipation that silver will outperform gold this year. This expectation stems from the belief that investment demand for silver, which has been lagging, is set to increase. This increase in demand is expected to contribute significantly to the momentum in silver prices.

Treasury Yields and Inflation Data

The stability of U.S. Treasury yields reflects the market’s anticipation of the upcoming U.S. consumer inflation data. This data is crucial as it will provide insights into the potential actions of the Federal Reserve, especially concerning interest rates. A rise in the consumer price index (CPI) and core CPI could influence the Fed’s decision on rate cuts, which has been a subject of uncertainty in recent weeks.

US CPI Data and Rate-Cut Expectations

The expected increase in the year-on-year CPI to 3.4% and a core CPI slowdown to 3.7% puts the focus on inflation. Higher-than-expected inflation numbers could delay rate-cut expectations, as seen from the shift of expectations from June to July following strong job data. Higher interest rates tend to decrease the appeal of non-yielding assets like silver.

Fed Minutes and Market Reaction

The release of the minutes from the Fed’s March meeting is highly anticipated. These minutes will offer deeper insights into the policymakers’ perspectives on the economy and future monetary policies. This information is pivotal for markets, as it helps in shaping expectations and strategies, particularly in the context of inflation and interest rate decisions.

Short-Term Market Forecast

Considering the current mix of inflationary pressures, geopolitical tensions, and the pending decisions of the Federal Reserve, the silver market is poised for a bullish trend in the short term. The expectation of increased investment demand, coupled with the global economic context, suggests a strong potential for silver prices to experience significant growth in the coming months. Investors should closely monitor the upcoming inflation data and Fed’s policy decisions for further cues.

Technical Analysis

Daily Silver (XAG/USD)

Despite today’s early weakness, the trend is still up with some traders not expecting to encounter significant resistance until $30.00. Nonetheless, with the market so far above the 50-day moving average at $24.14 and the 200-day moving average at $23.54, it remains vulnerable to a near-term correction.

A trade through $28.33 will signal a resumption of the uptrend, but this move coupled with a lower close will indicate the selling is greater than the buying at current price levels. This could be enough to trigger a shift in sentiment.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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