Silver price (XAG/USD) climbed to a new multi-year high, around $36.20, as buyers demonstrated strong value-buying interest, while the supply deficit continued and industrial optimism grew. Traders are currently switching messages to US Nonfarm Payroll (NFP) data for May, which can provide insights about the Federal Reserve’s next move on monetary policy.
Silver Gains on Value Gap With Gold
Analysts continue to emphasize silver’s long-term underperformance versus gold, designating it a “value buy” at current levels. Commerzbank claims that silver is “significantly undervalued”, and in a structurally tight market, they speculate upside potential. Demand for silver has remained robust even as trade tensions between the United States and China eased, as long as there is a reliance on demand from its dual role as a haven and industrial metal.
Industrial Demand Supports Silver Prices
Geopolitical calm generally decreases safe-haven flows. However, silver’s fundamental strengths are supported by its industrial applications in electric vehicles (EVs) and solar panels, along with its uses in semiconductors. President Donald Trump’s offering a positive statement on his direct conversations with Chinese President Xi Jinping gave markets comfort about better US-China trade relations but did little to keep silver’s upside in check. Instead, investors are betting on long-term industrial consumption, particularly as the market is expecting a supply deficit for five straight years.
US NFP Data in Focus
Participants in the market are waiting for the May US Nonfarm payrolls (NFP) report which will be released later today. The US Dollar Index (DXY) is currently sitting just above 99.00 and the outcome of the NFP data may impact the direction of the Fed’s interest rate stance.
Expectations suggest around 130,000 jobs added to the US economy, suggestively a small downward adjustment to the previous figures of 171,000 jobs added in April. Implications around wage growth and unemployment rates will also be a factor in the Fed’s sentiment. Higher interest rates also tend to be negative for non-yielding assets such as silver so pending economic events will have a fairly significant impact today.
XAG/USD Bullish Momentum Remains Strong
On the technical front, XAG/USD broke above the critical resistance at $34.87 (October 2022 high), which now acts as a strong support level. The 20-day Exponential Moving Average (EMA) near $33.85 confirms a bullish trend, while the 14-day Relative Strength Index (RSI) above 70 indicates robust buying pressure.
Looking ahead, silver could challenge the psychological resistance level of $40.00, while a break below $34.87 could trigger a short-term correction.
Conclusion
The outlook for silver remains bullish in the short term, as a result of valuation attraction, industrial demand, and tight supply conditions. At the global macro level, conditions seem relatively stable. However, the upcoming US NFP report might bring volatility making it a key event for XAG/USD traders. As long as silver stays above key support, the $40.00 target can remain in sight.
About The Author
