Silver (XAG) Forecast: Will Prices Drop Below $28.57 Amid Gold’s Record Surge?

Silver Underperforms as Gold Hits Record Highs

Silver prices are facing downward pressure despite gold’s recent surge to record highs. This divergence in precious metals performance has caught traders’ attention, prompting a closer look at the factors influencing these markets.

At 11:04 GMT, XAG/USD is trading $29.07, down $0.15 or -0.52%.

Silver Price Action

Silver is currently trading below its 50-day moving average of $29.19, indicating bearish sentiment. The metal’s downside momentum could challenge the June 26 main bottom at $28.57. A breach of this level might extend selling pressure towards $26.85 to $26.17, potentially reaching the 200-day moving average at $25.03.

Supportive Factors for Silver

Several factors typically support silver prices. The Federal Reserve’s potential interest rate cuts, with a 97% chance priced in for September, should theoretically boost both gold and silver. Political uncertainty following President Biden’s withdrawal from the 2024 race and potential U.S.-China decoupling under a Trump presidency could increase silver’s appeal as a safe-haven asset. Additionally, silver’s role as an inflation hedge remains relevant.

Factors Weighing on Silver

Despite these supportive elements, silver faces significant headwinds. Industrial demand concerns, particularly due to China’s economic slowdown, are likely contributing to silver’s underperformance. The relatively strong dollar makes silver more expensive for foreign buyers. Sluggish Asian physical demand and deep discounts reflect weak buying interest. Technical factors, with silver trading below key moving averages, may be triggering additional selling pressure.

Gold Outperformance

Gold recently scaled an all-time high of $2,483.60, benefiting from its status as the premier safe-haven asset in times of extreme uncertainty. This focus on gold may be drawing attention and capital away from silver.

Market Forecast

The short-term outlook for silver appears bearish. The metal’s dual nature as both a precious and industrial metal is currently working against it. While monetary policy and geopolitical factors provide support, silver’s industrial component makes it vulnerable to economic slowdowns, particularly in China.

Traders should watch for a potential break below the $28.57 support level, which could trigger further downside. However, upcoming economic data, shifts in Fed policy expectations, or changes in industrial demand could provide volatility and potential turning points in the silver market.

Technical Analysis

The silver market is exhibiting clear bearish signals. It’s trading below the 50-day moving average ($30.20) and approaching critical support at $28.57. A break below this level could trigger a significant sell-off, potentially targeting the 200-day moving average at $25.47. This technical setup suggests increased downside risk and a possible start of a steeper decline.