The capital flow from precious metals to stocks and cryptos was one of the main factors in silver’s correction in November. However, Bitcoin has already exhausted its main driver, and capital may flow back to XAGUSD. Let’s discuss it and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Silver may remain in deficit for a fifth consecutive year in 2025.
- Donald Trump’s tariffs could slow China’s demand.
- Holdings in metal-focused ETFs are expected to rise for the first time in three years.
- A break above the 31.45 resistance level would signal an opportunity to buy XAGUSD.
One-Week Fundamental Forecast for Silver
After a temporary decline following Donald Trump’s victory in the U.S. elections, silver aims to end 2024 on a positive note. Its price has risen by nearly 31% since the start of the year, outperforming gold (+27%) as well as platinum (-6%) and palladium (-12%). Demand for silver significantly exceeds supply, leading to a market deficit for the fourth consecutive year. Coupled with easing monetary policy by the Federal Reserve, that has supported silver prices for most of 2024.
Silver Market Balance Trends
Source: Bloomberg.
Commerzbank forecasts a rally in XAGUSD to 32 and 33 by mid-to-late next year, which is a bullish outlook amid the gold value of $2,650 per ounce. Another market deficit is expected in 2025 amid the growth in solar photovoltaic demand, which has more than doubled in the last three years. It is currently almost equal to investor interest in bars and coins.
The Silver Institute has indicated strong industrial demand from China and Indian investors’ insatiable appetite for ETFs. This authoritative organization anticipates the first inflow into specialized exchange-traded funds in three years, with an increase of 8% compared to late 2023 levels. Additionally, China is expected to emerge as the leader in the industrial use of silver. However, the impact of Donald Trump’s tariffs could ruin this outlook.
The Silver Institute suggests waiting to assess the impact of U.S. protectionism, believing that banks forecasting XAGUSD at 36-38 by the end of 2025 are correct. Silver remains a precious resource, demonstrating high demand. Its November failure was due to the Trump trade. Although precious metals had been projected to profit from the Republican victory in the election, investors preferred more profitable assets, such as Bitcoin and U.S. stock indices. Concerningly, the outflow of capital from the silver market to stocks and cryptocurrencies launched a bearish correction in XAGUSD.
Silver and Bitcoin Trends
Source: Trading Economics.
Bitcoin risks correcting after the market has reacted to the appointment of officials favorable to the crypto industry as heads of the Securities and Exchange Commission and members of Donald Trump’s team in the White House. This could redirect capital back to the precious metals market and support the growth of XAGUSD quotes.
Weekly Trading Plan for Silver
The retreat of the Trump trade and the Fed’s intention to cut the federal funds rate at its December meeting have catalyzed silver’s rally. Both factors are putting pressure on the U.S. dollar and supporting the white metal. If silver manages to break above the resistance at $31.45 per ounce and consolidate above it on the back of the U.S. employment data for November, the risks of further growth to $32.55 will increase. Isn’t it a reason to buy?
Price chart of XAGUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
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