Silver (XAG) Forecast: Prices Drop as China’s Stimulus Disappoints, Support at $29.71

Silver Prices Drop as China’s Stimulus Plan Falls Short of Expectations

Silver prices declined on Monday as traders reacted to underwhelming details from China’s latest stimulus announcement. The precious metal’s short-term technical range is currently between $29.71 and $32.96, with a key pivot at $31.33. Additionally, the intermediate range of $27.71 to $32.96 creates another critical pivot at $30.33. This zone of $30.33 to $31.33 is essential for traders monitoring silver’s movement.

A sustained move above $31.33 could signal renewed buying interest, targeting $32.96, while a drop below $30.22 would indicate the return of sellers. If prices fall below this level, support is likely to be found at the 50-day moving average of $29.77, with further downside risk to $29.71.

At 12:35 GMT, XAG/USD is trading $31.21, down $0.33 or -1.05%.

China’s Stimulus Disappoints Traders

The drop in silver prices came after China’s finance minister gave a lackluster update on the country’s fiscal plans. The market had been anticipating stronger stimulus to support China’s slowing economy, which is the world’s largest consumer of silver. However, the finance ministry’s press briefing offered little detail, leaving traders unimpressed.

Instead of clear, aggressive actions, the announcement focused on general pledges to increase debt and support the property sector, but lacked specifics on how much would be spent. This left global investors, especially those looking for a boost in Chinese demand for commodities, feeling uneasy. China’s ongoing struggle with soft domestic consumption and deflationary pressures further added to market concerns.

Geopolitical Tensions Add to Market Uncertainty

Beyond China, silver prices are also being influenced by broader geopolitical risks. Investors are closely monitoring tensions in the Middle East, with fears that Israel might retaliate against Iran. U.S. officials have indicated that Israel is considering strikes on military and energy infrastructure, adding a layer of uncertainty to the market. Historically, such tensions have supported safe-haven assets like silver.

Additionally, investors are awaiting comments from U.S. Federal Reserve officials this week, as any signs of changes in interest rate policy could impact silver and other commodities. The market is pricing in an 88% chance of the Fed cutting rates by 25 basis points in November, which could provide support for non-yielding assets like silver.

Outlook: Bearish in the Short-Term

Silver faces headwinds in the short term due to weak demand from China and a lack of decisive fiscal measures to boost its economy. Unless the Chinese government delivers more concrete stimulus plans, silver is likely to remain under pressure. A sustained break below $30.22 could trigger further selling, with potential to test support at $29.71. However, geopolitical risks may provide some support, keeping prices from falling too sharply. Traders should watch for developments from both China and the Middle East to gauge the next move.