Silver Price Forecast: XAG/USD Soars Above $36 on Value Buying, US NFP Data Ahead
Silver Price Surges to Over a Decade High
Silver price (XAG/USD) has refreshed its over a decade high, reaching near $36.20 on Friday. The white metal is performing strongly as market experts cite it as a value buy, given its secular underperformance in comparison with Gold.
Undervaluation and Supply Deficit
Analysts at Commerzbank note that silver has underperformed gold over a long period and appears significantly undervalued. This is attracting investors, with the silver market expected to be in a ‘supply deficit for the fifth consecutive year.’ However, the deficit is expected to be ‘significantly smaller’ as demand is likely to decline and supply is set to increase.
Global Economic Front and Trade Relations
Trade worries between the United States and China have eased after a post from President Donald Trump signaled a direct conversation with Chinese leader XI Jinping, leading to smooth trade talks between the two. Theoretically, resolving global economic tensions should diminish demand for safe-haven assets like Silver. However, demand for Silver as an industrial input is expected to increase, given its application in sectors such as mining, Electric Vehicles, and semiconductors.
US NFP Data and Federal Reserve Outlook
Investors are now focusing on the US Nonfarm Payrolls (NFP) data for May, set to be published at 12:30 GMT. The labor market data will influence market expectations for the Federal Reserve’s monetary policy outlook. Higher interest rates by the Fed for a longer period could bode poorly for non-yielding assets like Silver.
Technical Analysis
Silver price advances to near $36.20 after breaking above the key resistance plotted from the October 2022 high of $34.87, which will act as a key support now. The advancing 20-day Exponential Moving Average (EMA) near $33.85 suggests that the near-term trend is bullish. The 14-day Relative Strength Index (RSI) jumps above 70.00, indicating strong bullish momentum.
Key Levels and Outlook
Looking up, the psychological level of $40.00 will be the major resistance for the Silver price. On the downside, the October 2022 high of $34.87 will act as key support for the asset.
Conclusion and Future Developments
The silver price rally is driven by value buying and its undervaluation compared to gold. With the US NFP data ahead, investors will closely watch for cues on the Fed’s monetary policy outlook. A strong labor market could lead to higher interest rates, potentially impacting non-yielding assets like Silver. However, the metal’s industrial applications and undervaluation are likely to sustain its demand.
- Silver price reaches near $36.20, a over a decade high
- Value buying and undervaluation compared to gold drive the rally
- US NFP data for May to influence Fed’s monetary policy outlook
- Key support at $34.87, resistance at $40.00
