Silver Price Forecast: The Impact of India's Solar Demand and Market Risks

Market Overview

Silver (XAG/USD) has continued its downward trajectory, trading around the $31.64 level and hitting an intra-day low of $31.58. The precious metal’s slide can be attributed to a modest rise in the US dollar, coupled with a broader risk-on sentiment in global markets.

India’s Solar Boom Driving Silver Demand

A notable driver of silver demand is India’s growing solar cell industry, which has seen a significant increase in production. In the first four months of 2024, India imported over 4,172 metric tons of silver, surpassing its total imports for the previous year. The country’s shift to advanced, high-efficiency solar cells, which require higher silver content, has been a major factor in this surge.

Leading companies like Tata Power and Reliance Industries are expanding their solar manufacturing capacities, increasing demand. This heightened demand is pushing silver prices higher, as the metal’s excellent conductivity makes it a critical component in solar technology.

Analysts anticipate continued upward pressure on silver prices due to these industry trends, though price volatility and supply constraints remain key risks.

China’s Stimulus Boosts Silver, but Industrial Demand Poses Risks

China’s recent stimulus measures have contributed to a rise in silver prices, as these policies are expected to boost demand for industrial metals. Analysts from Saxo Bank and Citi predict that silver could outperform gold in the near term, with Citi forecasting silver prices to reach $35 within three months and $38 over the next year. However, concerns about weakening industrial demand in China, especially in the solar sector, could limit silver’s upside potential.

Despite the optimistic forecasts, slow growth in China’s industrial output and potential consolidation in its solar industry might dampen silver’s performance in the short term. Analysts like Carsten Menke from Julius Baer caution that silver’s outlook increasingly hinges on gold’s performance, making it crucial for investors to watch broader market trends closely.

Short-Term Forecast

Silver remains under pressure, trading around $31.64. Failure to break above key resistance at $31.89 suggests continued downside, with immediate support at $31.43 and further risks toward $31.18.

Silver (XAG/USD) Price Forecast: Technical Outlook

Silver (XAG/USD) is trading at $31.64, down 0.42% in today’s session. The precious metal is under pressure as it fails to break above the key pivot point at $31.89. Immediate resistance lies at $32.24, with further barriers at $32.47 and $32.70.

If silver reclaims the $31.90 level, it could spark renewed bullish momentum. However, a break below immediate support at $31.43 may extend the downside to $31.18, with stronger support at $30.87. Technical indicators suggest bearish sentiment, as silver remains below the 50-day EMA at $31.88. Watch for a decisive move to determine the next direction.