Silver (XAG) Forecast: Will Silver Bounce or Drop as U.S. Election Nears?

Silver Prices Poised for Volatility as U.S. Election and China Stimulus Loom

Silver markets edged higher on Monday, with traders closely watching two pivotal events: the U.S. presidential election and anticipated stimulus measures from China. The metal is trading near $32.49 per ounce after two weeks of declines from October’s high of $34.87, reflecting a wait-and-see stance as both U.S. policy directions and Chinese economic measures take shape. With these events setting the stage for potentially large moves, silver’s short-term outlook depends on whether support holds or new catalysts spark a rally.

At 13:50 GMT, XAG/USD is trading $32.85, up $0.40 or +1.22%.

U.S. Election Brings Inflation Debate to the Forefront

The U.S. presidential race between Democratic candidate Kamala Harris and Republican incumbent Donald Trump has introduced caution across financial markets, with silver and gold prices sensitive to inflationary expectations tied to each candidate’s potential policies. A Trump win is expected to stoke inflation concerns, given his focus on tax cuts and trade tariffs, which has typically driven gold higher as investors hedge against rising prices. Silver, which often follows gold’s lead, could also benefit in this scenario, with analysts watching for gold to approach $35.40 on inflationary momentum.

Conversely, a Harris victory may lead to more restrained inflation expectations, aligning with her approach to continue the Biden administration’s economic policies. This could temper precious metal prices in the near term, as a more stable policy stance is likely to weigh down the inflation hedge demand for both gold and silver.

Federal Reserve Rate Cut in Focus

Further supporting silver’s potential, the Federal Reserve is scheduled to meet on Thursday and is anticipated to announce a 0.25% rate cut. This dovish stance is adding pressure to the U.S. dollar, which has declined 0.6% to a two-week low. For silver, a weaker dollar makes dollar-denominated metals more attractive to international buyers, potentially spurring demand if the rate cut materializes. Federal Reserve Chair Jerome Powell’s post-meeting commentary will be key, as any indication of further rate cuts could strengthen silver’s appeal as an alternative asset.

China’s Stimulus Measures to Drive Industrial Demand

The National People’s Congress meeting in China this week adds another layer of influence, with analysts expecting a new round of fiscal stimulus to counter domestic economic pressures. Given silver’s extensive use in electronics and manufacturing, any substantial stimulus could drive up industrial demand for the metal. If Trump wins the election, the likelihood of increased U.S.-China tariffs may push China to enact a larger stimulus package to offset trade tensions, potentially increasing demand for silver in domestic infrastructure projects.

Market Forecast

Silver prices are showing potential to regain momentum, with traders eyeing a test of October’s high of $34.87 if inflationary pressures increase under a Trump administration or if China announces an aggressive stimulus package. On the downside, silver could test support near $31.21 if a Harris victory brings more stability, cooling inflation expectations. Traders should prepare for heightened volatility this week as both the U.S. election outcome and China’s policy direction unfold, influencing silver’s immediate price trend.