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Despite the pullback, silver remains confident. Slowing inflation in the United States, strong demand in Asia, and rapid growth in industrial use should spark enthusiasm XAGUSD Bulls. Let’s discuss these aspects and make a trading plan.
Monthly fundamental forecast for silver
The double whammy from Asia and North America pulled silver down from 11-year highs. The impressive job growth in the US in May was worrying XAGUSD With the federal funds rate likely to remain at 5.5% for a longer period, and the People’s Bank of China halting gold purchases in May, it affected the entire precious metals market. However, silver recovered very quickly.
In 2023, silver barely rose due to the slow recovery of the Chinese economy after Covid-19 and the rapid growth of the US GDP, which forced the Fed to tighten monetary policy aggressively to curb inflation. However, in 2024, the white metal has emerged as one of the leaders in the commodity market. Its value rose by 23.3%, outperforming gold by 10 percentage points.
One such factor is feverish demand in China, where premiums between Shanghai and London range between $10 and $12 per ounce amid the rapid depletion of publicly traded silver reserves. The situation is similar to what happened in the gold market in late 2023. Premiums were equally high at the time but have now fallen to $2.
Silver prices and insurance premiums in Shanghai and London
Source: Kitco.
The value of the white metal in yuan has risen by 15% since the beginning of January. It is not easy to find a more efficient investment instrument. Furthermore, rising gold prices lead to it being replaced by cheaper alternatives. This primarily concerns the jewelry industry. Industrial demand for silver is high. Its share is growing steadily to reach 55%. Meanwhile, the production of solar panels, electric cars, and artificial intelligence technologies paint a bright future for them XAGUSD.
Collapse in demand for silver
Source: Kitco.
Solar energy has nearly tripled the demand for silver in a dozen years. While it represented 5% in 2014, it rose to 13.8% in 2023. With 1 million electric cars sold in the United States in 2023, an increase of 52% from 2022, 17 million electric cars are expected to be sold worldwide in 2024. By 2035, the International Energy Agency expects a full shift to electric cars. The white metal used in manufacturing will certainly benefit.
This will be the case if the International Energy Agency’s forecasts of demand growth to 105.4 million barrels per day, supply growth to 114 million barrels per day, and an oil market surplus of more than 8 million barrels per day in 2030 prove accurate. It means an era characterized by lower energy prices, which will lead to deflation in various parts of the world and requires a very accommodating monetary policy on the part of central banks led by the Federal Reserve. Massive interest rate cuts and weakness in fiat currencies, most notably the US dollar, will create tailwinds for all precious metals.
Monthly trading plan for silver
Therefore, one should not be afraid of patching in XAGUSD. It creates an opportunity to open long trades with the potential for prices to return to record levels near $50 per ounce. Long trades can be considered on pullbacks to $28.2 and $27.5, as well as a return of silver above $30.3.
XAGUSD price chart in real time mode
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