Silver Price Forecast: XAG/USD posts fresh monthly high around $32.30 on firm dovish Fed bets

• Silver price posts a fresh five-week high around $32.30 as traders price in Fed rate cut bets for the policy meeting on Wednesday.
• A moderate growth in rental prices boosted Fed dovish bets.
• Investors await the outcome of China’s closed-door economic work conference.

Silver price (XAG/USD) refreshes an almost five-week high at around $32.30 in Thursday’s European session. The white metal strengthens as traders have fully priced in the Federal Reserve (Fed) to cut interest rates again by 25 basis points (bps) to 4.25%-4.50% in the policy meeting announcement on Wednesday, a scenario that is favorable for non-yielding assets, such as Silver, as it reduces their opportunity costs.

Fed dovish bets escalated after the release of the United States (US) Consumer Price Index (CPI) report for November, which showed that rental prices rose at a moderate pace. Annual headline and core CPI – which excludes volatile food and energy prices – rose by 2.7% and 3.3%, respectively, in line with expectations.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, ticks lower to near 106.50. 10-year US Treasury yields advance to near 4.30%.

Going forward, investors will focus on the outcome of China’s two-day economic work conference, a high-level meeting of China’s top leadership that will show the economic agenda for 2025. The administration is expected to release a mammoth stimulus package to boost domestic consumption and stabilize the realty sector.

The demand for Silver as a metal would strengthen if the Chinese government released a robust economic package, given its application in various industries such as solar energy, electric vehicles, and mining.

Silver technical analysis

Silver price refreshes monthly higher near $32.30 after breaking above the two-day resistance of $32.00. A bull cross, represented by 20- and 50-day Exponential Moving Averages (EMAs), suggests a fresh bullish trend.

The 14-day Relative Strength Index (RSI) approaches 60.00. Should the bullish momentum trigger if the RSI breaks above 60.00

Looking down, the upward-sloping trendline around $29.50, which is plotted from the February 29 low of $22.30 on a daily timeframe, would act as key support for the Silver price. On the upside, the horizontal resistance plotted from the May 21 high of $32.50 would be the barrier.

Silver daily chart

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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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