Silver Price Forecast: XAG/USD holds position above $29.00 ahead of US PMI data
|- Silver price remains steady ahead of US PMI data due on Wednesday.
- The slowdown in the Chinese economy could negatively impact the industrial demand for Silver.
- The safe-haven Silver may struggle due to the increased ceasefire optimism in the Middle East.
Silver price (XAG/USD) stays above $29.00 per troy ounce during the European session on Wednesday. The price of the grey metal grapples to continue its gains as investors awaited a slew of key US economic data that could shed light on the path of Federal Reserve monetary policy.
The US Purchasing Managers Index (PMI) data is scheduled to be released later in the North American session. Additionally, the focus will be on the Gross Domestic Product (GDP) Annualized (Q2) figures, which are set to be released on Thursday, and the latest Personal Consumption Expenditures (PCE) price index report on Friday. These reports are expected to provide new insights into the economic conditions in the United States.
Meanwhile, sluggish economic activity in China has added extra selling pressure on Silver. Concerns about the weak Chinese economy were intensified by an unexpected rate cut from the People's Bank of China (PBoC) on Monday. Silver, which is crucial for various industrial applications including electronics, solar panels, and automotive components, is particularly sensitive to these economic conditions. Given China's position as one of the world's largest manufacturing hubs, the country's industrial demand for silver is substantial.
India has reduced import duties on gold and silver from 15% to 6% to support its jewelry manufacturing sector, which has positively impacted the demand outlook in the world's second-largest consumer of bullion.
The safe-haven assets like Silver could lose some demand from the increased optimism surrounding potential ceasefire negotiations between Israel and Hamas. Israeli Prime Minister Benjamin Netanyahu has hinted that a ceasefire agreement, which could lead to the release of several hostages in Gaza, might be in the works. Netanyahu is currently in Washington to address Congress, according to The Associated Press.
Egypt, Qatar, and the United States (US) are working to broker a phased deal between Israel and Hamas to halt the fighting and secure the release of remaining hostages. Meanwhile, in China, Palestinian factions Hamas and Fatah have signed a declaration to form a unity government and resolve their long-standing rift.
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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