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Home CommoditiesForex Silver may begin a short-term correction. Forecast as of June 18, 2024

Silver may begin a short-term correction. Forecast as of June 18, 2024

by xyonent
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Blog Xagusd 18 06 24.jpg

Despite the pullback, silver remains full of confidence. Slowing US inflation, strong demand in Asia, and rapid growth in industrial uses only fuel the XAGUSD bulls. Let’s discuss these aspects and make a trading plan.

Silver Monthly Fundamental Forecast

A double blow from Asia and North America sent silver tumbling from its 11-year high. The strong US job growth in May raised the possibility that the Fed Funds rate would remain at 5.5% for an extended period of time, spooking XAGUSD bulls. Also, the People’s Bank of China halted gold purchases in May, impacting the entire precious metals market. However, silver recovered quickly.

In 2023, silver barely rallied as China’s economy’s slow post-COVID-19 recovery and the US’s GDP boom forced the Fed to aggressively tighten monetary policy to curb inflation. But in 2024, the platinum metal emerged as one of the commodity market leaders, increasing in value by 23.3%, beating gold by 10 percentage points.

One factor is frenetic demand in China, where premiums in Shanghai and London are at $10-12 an ounce amid a rapid decline in silver’s listed reserves. The situation is similar to what happened in the gold market in late 2023, when premiums were similarly high but have now fallen to $2.

Silver prices and premiums in Shanghai and London

Source: Kitco.

Since the beginning of January, the value of the platinum metal in RMB has increased by 15%. It is not easy to find a more efficient investment tool. Moreover, the high price of gold is leading to its replacement with cheaper alternatives. First of all, this concerns the jewelry industry. Industrial demand for silver is high, and its share is steadily growing, reaching 55%. At the same time, the production of solar panels, electric vehicles and artificial intelligence technologies paint a bright future for XAGUSD.

Silver demand breakdown

Source: Kitco.

Photovoltaics has almost tripled the demand for silver in 12 years, from 5% in 2014 to 13.8% in 2023. Electric cars sold in the US in 2023 are expected to increase 52% from 2022 to 1 million, and 17 million are expected to be sold worldwide in 2024. By 2035, the IEA predicts a complete shift to electric cars. The white metal used in their manufacture will certainly benefit.

If the International Energy Agency’s projections are correct, they will prove correct, predicting demand of 105.4 million bpd, supply of 114 million bpd, and an oil market surplus of over 8 million bpd in 2030. This will mean a period of low energy prices, leading to global deflation and the need for ultra-loose monetary policies from central banks led by the Fed. Significant interest rate cuts and weakening fiat currencies, especially the US dollar, will be a boon for all precious metals.

Silver Monthly Trading Plan

Therefore, there is no need to fear a correction in XAGUSD. The prospect of the price reverting back to record highs near $50 per ounce creates an opportunity to enter a long trade. Long trades can be considered on pullbacks to $28.2 and $27.5, and when silver rises above $30.3.

XAGUSD price chart in real time mode

The contents of this article reflect the opinions of the author and do not necessarily reflect the official views of LiteFinance. The material published on this page is for informational purposes only and should not be considered as the provision of investment advice within the purposes of Directive 2004/39/EC.

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