Silver (XAG) Forecast: Could Easing Labor Data Lift Prices Next Week?

Silver Faces Resistance as Macro Pressures Limit Upside

Silver prices rose slightly last week, with XAG/USD closing at $29.615, up $0.228 or +0.78%. Despite the gain, silver continues to face headwinds as traders lock in profits and broader macroeconomic factors weigh on sentiment. Treasury yields, Federal Reserve policy, and dollar strength remain the dominant forces limiting silver’s upside, even as industrial demand holds steady​​.

Technically, the main trend is up, but the minor trend is down. This is weighing on upside momentum.

The nearest support is a low at $28.75. If it holds, prices could rebound into the pivot at $30.44. Overcoming this level will shift momentum to the upside, setting up the possibility of a near-term surge into a resistance cluster formed by another pivot at $32.26 and the minor top at $32.33.

Taking out $28.75 with conviction opens the door to a possible steep break with initial targets at $26.47 to $26.02.

Supply Deficits and Industrial Demand Support Long-Term Outlook

Silver’s supply-demand imbalance remains a supportive factor for the long term. In 2024, production rose by just 2% to 1.03 billion ounces, while demand surged 7% to 1.21 billion ounces, leaving the market with a 182-million-ounce deficit. This marks the fourth consecutive year of undersupply, largely driven by industrial applications tied to green technologies. Demand from solar panel manufacturing and electric vehicle production continues to outpace supply, reinforcing the long-term bullish case for silver​​.

China’s $411 billion infrastructure stimulus for 2025 is expected to further boost silver consumption, aligning with the country’s renewable energy initiatives. Industrial demand linked to these projects could significantly tighten silver’s supply-demand dynamics moving forward​.

Fed Policy and Treasury Yields Weigh on Near-Term Performance

The Federal Reserve’s measured approach to rate cuts remains a major obstacle for silver. After three cuts in late 2024, the Fed signaled plans for only 50 basis points of easing in 2025. This cautious stance supports the U.S. dollar and keeps Treasury yields elevated, reducing the appeal of non-yielding assets like silver. The 10-year Treasury yield currently sits at 4.631%, adding to silver’s opportunity cost​​.

Geopolitical Uncertainty Provides Modest Safe-Haven Support

Geopolitical risks continue to offer limited support for silver. While gold remains the primary safe-haven asset during times of uncertainty, silver benefits indirectly. Ongoing conflicts in Ukraine and the Middle East, alongside central bank gold purchases, have helped stabilize precious metals markets, preventing deeper pullbacks in silver​​.

China’s Stimulus: A Potential Game-Changer

China’s proactive economic policies could provide a boost to silver prices heading into 2025. President Xi Jinping’s recent pledge to implement broad stimulus measures highlights China’s focus on accelerating industrial growth and supporting domestic markets. These initiatives, aimed at boosting infrastructure and renewable energy, are likely to drive higher demand for silver across key industrial sectors​.

Non-Farm Payroll Data and Its Implications

Next week’s Non-Farm Payrolls report for December 2024 will be closely watched by traders. As the first labor market report of the new year, it could have significant implications for Federal Reserve policy. Strong labor data may reinforce the Fed’s cautious rate-cut trajectory, strengthening the dollar and pressuring silver. Conversely, weaker job growth could increase speculation around further easing, potentially providing a lift to silver prices​.

Forecast: Key Trends to Watch

Silver’s outlook will largely depend on developments in Fed policy, labor market data, and China’s economic measures. The focus remains on industrial demand and the supply deficit, but short-term price action will reflect broader macroeconomic shifts. Traders should watch the Non-Farm Payrolls release and any further stimulus announcements from China as key drivers for silver’s direction in the coming weeks.

More Information in our Economic Calendar.