Silver has continued higher and is now attempting to break above the $30 barrier.
A dovish boost from the Fed was one of the reasons behind the surge.
Demand from China and India could prove crucial in the years ahead.
For less than $8 a month, InvestingPro’s Fair Value tool helps you find which stocks to hold and which to dump at the click of a button.
Silver prices have surged, and are now attempting to break above the $30 level after finding support around $26-27. A key catalyst for this rally was Federal Reserve Chair Jerome Powell’s confirmation of imminent interest rate cuts at the Jackson Hole conference.
A weaker US dollar and a structural imbalance between silver supply and demand are expected to support a continued uptrend. The renewable energy sector and growing demand from China and India, which is projected to double this year, remain key drivers for silver.
Weaker U.S. Dollar Boosts Gains for Gold and Silver
The U.S. dollar’s downtrend is evident on its index chart, which is approaching a critical support level from last December.
The extent of the dollar’s decline will largely depend on the Federal Reserve’s interest rate decision. A 50 basis point cut, rather than the anticipated 25 basis points, could pave the way for further declines.
Alongside U.S. macroeconomic data, including GDP and PCE inflation figures released this week, the upcoming labor market readings will be crucial.
If unemployment rises above expectations, the likelihood of a 50 basis point rate cut will increase.
Demand in Asia a Key Tailwind
When it comes to silver, Asian demand, particularly from China and India, plays a significant role. China’s demand surged by 44% year-over-year to 261.2 million ounces last year, with expectations for continued growth.
The renewable energy sector, especially solar panel production, drives much of this demand, with China producing over 90% of global solar panels.
India also shows increasing silver demand, potentially doubling from 2023 levels. This rise is driven by both photovoltaic panels and growing needs in the electronics sector.
Globally, the gap between demand and supply is projected to reach 215.3 million ounces (6,695 tons) this year, a 17% increase from last year, according to the Silver Institute.
Technical View: Silver’s Next Target
Silver prices are on an upward trajectory, although a local correction might be imminent. Should a correction occur, watch for the confluence of the upward trend line and the demand zone around $29 per ounce as potential support.
If silver continues its bullish trend, it will first encounter resistance at $32 per ounce. The primary target, however, remains this year’s peak just below $33 per ounce.
Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of assets in any way, nor does it constitute a solicitation, offer, recommendation or suggestion to invest.
