Silver (XAG) Forecast: Can the Silver Rally Power Past $40 on Supply Tightness?

Silver Charges Toward $40 as Supply Tightness and Tariff Risks Fuel Momentum

Silver prices surged to $39.53 per ounce Wednesday, marking a near 14-year high as the metal continues its outperformance against gold. While profit-taking capped gains near the $40 level, the technical picture remains constructive. The uptrend holds as long as key support at $37.50 remains intact, with deeper buying interest expected around $36.16 and the 50-day moving average at $35.90.

The metal is up 36% year-to-date, compared to gold’s 31%, with the gold-silver ratio tightening to 87 from 105 in April. This signals growing investor preference for silver as a leveraged, more affordable play on both precious and industrial themes.

U.S. Tariff Policy Adds Fuel to the Rally

The rally intensified following President Trump’s announcement of 50% tariffs on copper imports beginning August 1. Though silver wasn’t directly targeted, the broader market priced in potential disruptions, particularly in U.S. futures contracts, which widened their premium over London benchmarks. This dislocation has pushed lease rates higher in the spot market, adding to the bullish undertone.

Market strategists suggest that if physical premiums in Asian markets continue rising, silver could breach the psychological $40 level decisively. Tariff-driven uncertainty is also increasing investor demand for alternatives, drawing more capital toward silver alongside industrial metals.

Gold Softens on Profit-Taking and Fed Focus

Gold, in contrast, saw modest pressure as traders booked profits near $3439.04, unable to break resistance at $3451.53. Treasury yields climbed after reassurances that Fed Chair Powell would stay in his role, with the 10-year yield rising to 4.384%. This reduced safe-haven demand, though gold remains underpinned by dollar weakness and central bank buying. Support holds between $3374.42 and $3336.40.

Analysts caution that gold’s failure to push through resistance could stall silver’s ascent in the short term, as the metals often move in tandem. However, silver’s growing industrial utility gives it a stronger independent tailwind.

Will Silver Break $40 Next? Watch Industrial Demand and Physical Tightness

Silver’s rally is being fueled by strong industrial consumption and structural supply deficits now stretching into a fifth year. Traders are watching closely for signs of physical tightness—particularly rising premiums in Asia—which could accelerate a breakout. If gold stabilizes and the dollar resumes weakening, silver may test $42 in the coming sessions.

However, with market positioning stretched, short-term corrections remain possible. Pullbacks to the $35–$36 range would likely attract strong dip-buying interest. For now, silver’s trend remains firmly upward, with $40 as the next key level to watch.

More Information in our Economic Calendar.