Descending Silver Channel Pushes Price to $29.20
LONDON (July 22) Despite expectations of a Federal Reserve rate cut in September, silver prices (XAG/USD) remained under selling pressure, trading around $29.12 and hitting an intraday low of $29.06. This decline is largely due to the weakening Chinese economy, which has reduced industrial demand for the metal.
China, a major manufacturing hub, uses silver extensively in electronics, solar panels, and automotive components. As the Chinese economy slows, reduced demand from this key market could negatively impact silver prices and market stability.
However, the anticipated rate cut by the Federal Reserve has somewhat supported silver by putting additional pressure on the US dollar, helping to limit the metal’s losses.
Silver Prices Could Stabilize Amid Supply Shortages
Silver prices may see stabilization due to potential supply shortages. Mining production has faced challenges from labor shortages and strict environmental regulations, resulting in tighter supplies.
The Silver Institute projects 2024 to be the fourth consecutive year of a supply deficit. Navneet Damani, Senior Vice President and Head of Commodities Research at Motilal Oswal Financial Services, highlighted these concerns in Business Standard.
Despite weaker demand from China, ongoing supply constraints could help stabilize silver prices.
China’s Economic Slowdown Damps Silver Demand
China’s economy grew by 4.7% in the second quarter, slower than the 5.3% increase in the first quarter and below the expected 5.1%. This slowdown is attributed to weak consumer spending and a prolonged property market slump.
Consequently, Chinese policymakers are intensifying efforts to boost confidence and stimulate the economy.
As a major user of silver in electronics, solar panels, and automotive parts, China’s economic struggles could negatively impact silver demand and prices.
US Dollar Weakens Amid Biden Exit and Fed Rate Cut Expectations, Boosting Silver Prices
The US dollar weakened after President Joe Biden announced his withdrawal from the presidential race, prompting investors to reassess their expectations.
Vice President Kamala Harris has emerged as a leading Democratic candidate, but former President Donald Trump remains the betting markets’ favorite.
Anticipated Federal Reserve interest rate cuts in September have added further pressure on the US dollar. Consequently, silver prices have stabilized as investors view silver as a safe-haven asset amid the uncertainty.
Short-Term Forecast
Silver (XAG/USD) may stabilize near $29.12 due to expected Fed rate cuts and ongoing supply shortages despite weaker Chinese demand. Watch for resistance at $29.78 and support at $28.87.
FXEmpire
