Silver Price Forecast: XAG/USD rallies vertically as Democrats take control of Houses
- Silver price soars to near $51.85 on Democrats’ victory in both the House and the Senate.
- Democrats controlling the Federal law could keep the US Dollar under pressure.
- The Fed is expected to tighten monetary conditions in the December meeting.
Silver price (XAG/USD) surges almost 4% to near $51.85 in the European trade on Wednesday. The white metal rallies vertically after the outcome of United States (US) midterm elections, in which Democrats have won majority seats in both Houses of Federal law.
The victory of Democrats has raised concerns over the continuation of ongoing policies, especially support Artificial Intelligence (AI) spending, by US President Donald Trump’s administration, leading to a significant improvement in the appeal of safe-haven assets, such as Silver. However, this uncertainty is expected to keep the US Dollar (USD) under pressure.
Dollar sentiment softens as US tech equities face renewed pressure
Analysts at Commerzbank warn that US equities, and "the more tech-heavy Nasdaq in particular, are likely to come under pressure” due to election, noting that the Dollar’s recent strength has been closely tied to "enthusiasm surrounding US equities and the resulting capital inflows."
In their view, any setback for US stocks could mean that "Dollar weakness could therefore become somewhat more entrenched over the coming hours." Commerzbank adds that "if investment begins to lose momentum, markets could start pricing in a weaker phase of US growth, which would weigh on the Dollar," reinforcing the risk that the currency’s latest pullback may extend as growth expectations are reassessed.
Going forward, the next key trigger for the Silver price will be US Nonfarm Payrolls (NFP) data for October, which will be released on Friday. The data is expected to have a significant impact on Federal Reserve’s (Fed) interest rate expectations.
Currently, the CME FedWatch tool shows that the Fed is highly expected to hike interest rates by 25 basis points (bps) to the 4.00%-4.25% range in the December meeting.
Later in the day, investors will pay attention to the US ADP Employment Change and the ISM Services PMI data for October.
Silver Technical Analysis
In the daily chart, XAG/USD trades at $51.77, keeping a bearish near-term bias as it remains below the 20-day Exponential Moving Average (EMA) at $54.83. The metal’s failure to reclaim this short-term trend benchmark suggests ongoing downside pressure, while the Relative Strength Index (RSI) at 36.69 shows weak momentum that has bounced from oversold territory but still lacks bullish conviction.
On the topside, initial resistance is located at the 20-day EMA near $54.83, and a sustained break above this level would be needed to ease the current bearish tone. On the downside, the 11-month low at $48.62 is the key support level; a break below the same would open the door for further downside towards $45.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.