Silver price analysis: XAG/USD rises to 5-week high amid China policy changes
Silver prices hit five-week high on China's policy shift and Fed rate cut expectations
Silver prices have surged to a five-week high, bolstered by key developments in China’s economic policy and growing expectations of interest rate cuts from the US Federal Reserve. Despite a slight retracement in recent trading, the outlook for the gray metal remains positive, driven by demand from the world’s largest consumer of raw materials and ongoing US monetary policy shifts.
Silver price dynamics (November-December 2024). Source: TradingView.
The week began with a strong bullish move in silver, which broke above the critical $31.50 resistance level, a price point that had limited gains in November. Silver prices rose by over 4% from $30.85 to $32.27 per Troy ounce, marking a notable five-week high. The surge was propelled by news from China, where policymakers outlined plans for a “moderately loose” monetary policy and a more proactive fiscal stimulus for the year ahead. This shift signals a stronger push for growth in China, which has the potential to drive up demand for raw materials, including silver. Chinese President Xi Jinping’s remarks about China’s confidence in meeting its economic targets further reinforced the sentiment that global demand for metals could rise.
Silver price outlook: uptrend continues despite minor retracement
However, silver’s ascent was briefly tempered by overbought conditions. On Monday, the relative strength index (RSI) rose above 70, prompting a minor retracement in the late trading session. The RSI remained elevated but dropped back below overbought territory, settling around 50 by Tuesday’s European trading session. At this point, silver’s price hovered around $31.80, a pullback from its earlier peak but still above key support levels.
Looking ahead, the ongoing strength of the US Dollar poses a challenge for silver prices, particularly as dollar-denominated silver becomes less affordable for international buyers. Silver’s immediate support remains at $31.50, while resistance is seen at $32.80. However, the potential policy shift of a Fed rate cut later this month could provide additional support to silver prices, especially if the USD weakens further.
Silver encounters significant resistance at $31.50, a level that has acted as a ceiling since November. Broader picture surrounding silver's price movement points to increasing the strategic value of the metal.
