Silver Price Prediction: XAG/USD Heads Higher On Demand Outlook and Weak Dollar Fundamentals

Summary:
• Silver prices have risen more than gold in 2024, with the high demand and weak US economy data pushing it to the highest level since 2012.

Silver prices rose to $32.51 per troy ounce on Monday, their highest level in since 2012, driven by a combination demand-side propulsion and positive futures market sentiment. The grey metal has gained almost 20 percent since the year began, and has risen by about 17.9 percent in the last two weeks, beating gold in both occasions.

Analysts attribute the current rally to the pile-up in long positions in the futures market between February and April, which have paid off. Consequently, many investors have recently added their stake in silver, driving up demand. Also, the electric vehicles (EV) industry has heightened its demand for the commodity, and the drive for transition to clean energy is likely to keep the demand on the ascent in the coming months.

Silver is an excellent conductor of electricity, making it essential to manufacturing high-grade electrical equipment and machinery. Some estimates show that the EV industry could be responsible for consumption of 50 percent of all silver purchased in the global market globally. That is because the commodity is a key resource in the manufacture of key components in EVs. 

Beyond the EV industry, the renewable energy theme is also a key demand driver for silver. The metal is key to the manufacture of solar panels,  whose demand is also projected substantially. China, in particular, is aggressively expanding its manufacturing capacity for EVs and solar panels, supporting silver price upside as far as market fundamentals go.

On the safe haven front, the US dollar has weakened in recent days on the back of multiple soft economic data. Furthermore, yields on US treasury bonds have also eased, with benchmark 10-year and 5-year bonds both yielding less than 4.50 percent. This will add to the upward propulsion on silver prices.

Technical analysis

The momentum on silver price shows that the buyers are currently in control. The upward movement is likely to encounter the first resistance at $32.80. A break above that mark will likely strengthen the upward momentum, potentially pushing the price to test $33.20 in extension. On the other hand, a break below $32.80 will favour the sellers to take control, with the first support likely to come at $32.10. A breach of this mark could not only invalidate the upside narrative, but also result in extension of the downward momentum to test $31.85.