Strong industrial demand for silver, especially from India and China, and the metal’s appeal as a financial asset are working wonders. XAGUSD prices have soared to 11-year highs. Let’s talk about it and make a trading plan.
Monthly fundamental forecast for silver
It is important to be in the right place at the right time! Silver is making the most of its dual status as an industrial metal and a financial asset. With the reinforcement of the bipolar world and the active de-dollarization in the conventional Eastern countries, the XAGUSD quotes have reached a record level since the end of 2012, and this is not yet the limit. Silver is opening new horizons as it consolidates above $30 an ounce.
Demand for the white metal is immense. In China, silver premiums have jumped to 15% against world prices, offsetting the 13% tariff on silver imports and leading to a surge in foreign supply. Imports hit a three-year high of 390 tons in December before pulling back and jumping to 340 tons in April, above the five-year average of 310 tons.
Shanghai silver premium compared to global silver prices
Source: Bloomberg.
India offers an equally thrilling story. Silver imports for the first quarter surpassed the total for the previous year. Asia’s leading economies are actively using the metal to produce solar panels. Heraeus estimated that at the end of March, India’s installed solar power capacity was about 81 GW, and the country is on track to reach 500 GW by 2030.
India’s silver imports
Source: Kitco.
Investors questioned silver’s ability to hold above the psychologically important level of $30 an ounce, reducing the net speculative longs by 4,000 contracts to 37,700. Nevertheless, bulls may not fuel the XAGUSD rally, leading to an increase in the number of white metal-focused ETFs. Coupled with strong demand from India and China, this will reduce onshore reserves and push prices even higher. According to TD Securities research, growing demand could wipe out reserves in 12-24 months.
The allure of precious metals as a financial asset is evidenced by their price performance following the release of the Conference Board Consumer Confidence Index in the US. The indicator exceeded all the forecasts of the Bloomberg experts, triggering the return of US Treasury yields to the highest levels since early May and the strengthening of the US dollar against major world currencies. However, gold and silver disregarded such a trend in Treasury yields and the USD index, which would have caused XAUUSD and XAGUSD to collapse. Perhaps the principle of “when everyone else is selling, it’s a great time to purchase” was working. Central banks and savvy traders followed this principle, pushing prices even higher.
Monthly trading plan for silver
Silver follows gold in the wake of active buying by central banks in Eastern countries as part of the de-dollarization policy, and it is ahead of it due to strong industrial demand. This factor allows traders to purchase the white metal, adding more long trades on XAGUSD. The bullish targets can be shifted from $32 and $34 to $34.2 and $36.4 an ounce, especially since the first one has already been reached.
Price chart of XAGUSD in real time mode
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