Silver Price Forecast: XAG/USD falls to near $87.00 due to China-driven liquidation
- Silver stays under pressure after China’s massive liquidation and leveraged speculative unwinding.
- The decline of the grey metal deepens as solar manufacturers aggressively replace it with copper to cut costs.
- AI and EV demand could support Silver, while a 10% China premium signals localized supply tightness.
Silver price (XAG/USD) continues to lose ground for the second successive session, trading around $87.20 per troy ounce during the Asian hours on Wednesday. Silver prices remain under pressure following a massive liquidation event in China, triggered by the unwinding of leveraged positions after a wave of speculative excess.
The Shanghai Futures Exchange imposed stringent delivery restrictions, cutting delivery allocations to zero for many participants lacking approved hedging quotas. The selloff was compounded by a sharp reversal in China-led retail speculation,
In addition, dollar-denominated Silver has lost appeal amid a stronger US Dollar (USD), as the metal becomes more expensive for holders of other currencies.
Silver’s decline is being exacerbated by solar manufacturers, who are aggressively substituting the grey metal with copper to offset rising costs, even as the metal heads into its sixth consecutive year of structural supply deficits.
Silver’s demand from the AI and electric vehicle sectors continues to provide a steady floor. Meanwhile, a sharp 10% price premium in Chinese domestic markets points to localized supply tightness that has yet to be fully reflected in international prices.
The precious metal Silver could regain traction on persistent safe-haven demand after US President Donald Trump pledged to raise duties to 15% following a Supreme Court ruling that his use of emergency powers to impose tariffs exceeded his authority. However, the US on Tuesday moved ahead with a 10% tariff on all non-exempt goods, as initially announced by Trump on Friday.
Traders are also awaiting Trump’s State of the Union address later in the day. The speech comes ahead of a third round of nuclear talks between the US and Iran scheduled for Thursday. “Both the US and Iran seem to be delaying rather than seriously trying to negotiate a solid agreement acceptable to both sides,” said Robert Yawger of Mizuho Securities USA, according to Reuters.
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.
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