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While investors focused entirely on gold, silver managed to outrun the sector leader. It has grown by 22% year-to-date, and its potential hasn’t been exhausted yet. Let’s discuss it and make a trading plan for XAGUSD.
Monthly fundamental forecast for silver
In 2024, investors have refound interest in assets as old as time. Precious metals have long been considered a relic of the past, replaced by cryptocurrencies, but then gold and silver have gained a second wind amid geopolitical developments. The former hit a new record, and the latter soared to its highest since 2021 as Israel is rumored to be preparing for Iran’s attack on military targets.
Generally, gold reacts the first to the Fed’s monetary policy shifts and events in the Forex and bond markets, but silver can sometimes catch up or even outrun it. Betting on the white metal at the end of March, I could not even assume the target for longs at $29 an ounce would be reached so quickly. However, silver has already outdone gold, growing 22% since the beginning of the year, while the yellow metal has grown by 16%.
Gold/silver trends
Source: Bloomberg.
While geopolitics remains the main driver in this enthralling race, attracting investor attention worldwide, other trumps of the two metals differ. The XAUUSD bulls are backed by central banks that actively diversify assets within de-dollarisation policies. The XAGUSD buyers count on the significant share of industrial use in the structure of silver demand. It exceeds 50%, opening all doors to the bulls amid the gradual recovery of the US manufacturing sector.
Historically, the white metal has been sensitive to business activity in the US manufacturing sector. The fact that the US Purchasing Managers’ Index rose above 50 in March for the first time in 16 months gave the XAGUSD a green light.
Dynamics of silver and US manufacturing business activity
Source: Trading Economics.
In January, the Silver Institute expected industrial demand for silver to rise 4% in 2024 to a record 690 million ounces, but it could be even higher.
This fact, along with insufficient investment in silver production over the past few years, suggests a shortage. TD Securities asserts that these fundamental factors drive the XAGUSD’s solid uptrend. Bank of America forecasts growth to $35 an ounce.
An important factor supporting silver is… record gold prices. They force buyers from Asia to switch to a cheaper asset. Thus, Indian imports of the white metal jumped to 2,295 tons in February, three times more than 637 tons in January. The indicator increased by 66% compared to the year-ago period.
Monthly trading plan for silver
If Iran gets directly involved in the conflict in the Middle East, driving its escalation, the price of precious metals could rise even higher. I suggest that the long positions in silver opened at $24-$25 at the end of March should be held and built up on pullbacks. The levels of $30.6 and $32.2 could be new price targets.
Price chart of XAGUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
