Silver price forecast as the gold/silver ratio steadies

By:
on Nov 7, 2023
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  • Silver price has been in a consolidation phase in the past few weeks.
  • The gold/silver ratio has jumped as gold price nears the psychological point at $2,000.
  • Silver reacted to the latest NFP data and Federal Reserve decision.

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Silver price has moved sideways in the past few days as investors react to the latest Federal Reserve decision, Non-Farm Payrolls (NFP), and China economic data. The XAG/USD pair was trading at 22.72 on Tuesday, which was almost 10% above the lowest point in October. It remains by over 13% below the highest point this year.

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Gold/silver ratio spikes

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Silver price has been in a tight range in the past few days. Last week, the Federal Reserve decided to leave interest rates unchanged between 5.25% and 5.50%. While the bank left the door for another rate hike, most analysts believe that it is now done hiking rates.

The other important news came on Friday when the US published the latest non-farm payrolls (NFP) data. According to the Bureau of Labor Statistics (BLS), the economy added 150k jobs while the unemployment rate rose to 3.9%. The labor participation rate and wages slowed slightly.

These events are important for silver because of its role as a precious metal.  Like gold, silver tends to react to actions by the Fed. In most cases, silver rises when the Fed is either cutting interest rates or when it is hinting of rate cuts.

Silver price also reacted to the latest manufacturing PMI numbers from around the world. Economic numbers from China showed that the PMI dropped to 49 in October. The same happened in other industrial countries like the United States and Europe.

Silver reacts to these numbers because of its use in the industrial sector. It is used to manufacture products like solar panels, semiconductors, and kitchen products. 

Meanwhile, the latest data from China showed that exports dropped by 6.4% in October, worse than the median estimate of -3.3%. Imports, on the other hand, rose by 3%, which was better than expected -6.2%. Its total trade surplus narrowed to $405 billion.

Silver has underperformed gold in the past few months. The gold/silver ratio jumped to $88, the highest point since March 2023. It has jumped by over 15% from the lowest point this year. In most cases, if the gold/silver ratio is high, it means that it is right to buy silver.

Silver price forecast

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Silver price

XAG/USD chart by Tradingview

On the daily chart, we see that the silver price moved in a tight range recently. It has moved below the descending trendline shown in yellow. This trendline connects the highest swings since May 4th. It has also moved between the 50% and 61.8% Fibonacci Retracement levels. 

The price is also a few points above the crucial support level at $22.14, the lowest swing on June 23rd. Therefore, the outlook for the metal is neutral for now. The key support and resistance points to watch will be at $22.13 and $23.70.

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China Federal Reserve System Gold Silver USA Commodity Economic Interest Rate Manufacturing Precious Metals Trading Ideas