Silver (XAG) Forecast: Silver Slipping Toward $28.40–$26.87 – Will Buyers Step In?

Silver Slips as Traders Lock in Gains to Close the Year

Silver prices are easing lower as 2024 draws to a close, capping off a strong year for the metal. After peaking at $34.87 in October, silver has steadily declined, with traders focusing on the key value zone between $28.40 and $26.87. How the market reacts to this area will likely set the tone for early 2025.

Silver is also set to finish the year below critical technical levels, including the 200-day moving average at $29.78 and the 50-day moving average at $31.19. Entering the new year below these levels suggests further weakness, with downward pressure persisting unless these averages are reclaimed as support.

Still, silver is on track for a 22% gain in 2024 – its best performance since 2020.

Supply Crunch Tightens as Deficit Widens

Silver’s supply-demand gap deepened in 2024, highlighting a growing imbalance. Production edged up by just 2% to 1.03 billion ounces, while demand surged 7% to 1.21 billion ounces, leaving the market short by 182 million ounces. This marks the fourth straight year of undersupply, driven largely by industrial demand tied to green technologies.

Solar panels and electric vehicles continue to fuel demand, with projections indicating that solar manufacturing could consume the majority of global silver production by 2050. China’s $411 billion infrastructure stimulus for 2025 is expected to accelerate this trend, reinforcing silver’s role in renewable energy expansion.

Fed, Dollar Strength Cap Silver’s Upside

Despite bullish supply fundamentals, silver’s upside remains limited by Federal Reserve policy and a strong dollar. After cutting rates three times in late 2024, the Fed signaled only 50 basis points of easing in 2025. This gradual approach supports the dollar and keeps Treasury yields elevated, reducing the appeal of non-yielding assets like silver.

The 10-year Treasury yield, which recently climbed to 4.641%, further pressures silver, raising the opportunity cost for investors.

Geopolitical Tensions Keep Silver in Play

While macroeconomic forces dominate, geopolitical risks provide a safety net for silver prices. Ongoing conflict in Ukraine and the Middle East continues to drive gold demand, indirectly benefiting silver as a secondary safe-haven asset. Central bank gold purchases have also helped stabilize precious metals markets, preventing sharper declines in silver.

Market Forecast – Key Levels to Watch

Silver is likely to remain under pressure unless it can decisively break above the 50-day moving average at $31.19. If weakness persists, traders should monitor the $28.40 to $26.87 zone for potential support. A break below $26.87 could open the door for further declines toward $25.00.

However, if silver manages to reclaim $31.19, a move toward $33.50 could follow, driven by industrial demand and supply constraints. For now, the outlook leans bearish, but long-term fundamentals remain supportive.

More Information in our Economic Calendar.