Silver price forecast: here’s why XAG is rebounding

Silver price continues to outperform gold as it thrives in its position as a suitable alternative to the more expensive gold. Geopolitical tensions and economic uncertainties have been bolstering the precious metal and other conventional safe-haven assets. 

However, optimism over a Fed rate cut in September has improved the market sentiment while capping silver price gains. Despite the current uncertainties, the steady surge in EV demand is set to continue supporting silver price uptrend in the coming months. 

Silver price bulls defend bullish channel amid looming optimism

After its corrective pullback, silver price is rebounding cautiously amid mixed fundamental  signals. On the one hand, its positioning as a suitable alternative to the more expensive gold has fueled its uptrend in recent months. Over the past two months, silver price has risen by about 14% compared to gold’s 2%. 

Notably, geopolitical turbulence and economic uncertainties continue to bolster the demand for safe-haven assets. However, that momentum appears to have eased as cautious optimism shapes the market sentiment. 

While the fear & greed index has dropped from the greed end of the spectrum, it is still above average at a fear and greed index of 55. Rising expectations of a Fed rate cut as soon as September have improved the market sentiment. 

Read more: Silver price forecast as the US dollar index crashes

Even with the instabilities in the short term, silver price outlook for the medium term remains bullish. Among the key drivers is the surging demand for electric vehicles. 

Silver’s electric conductivity has made it a critical part of EV batteries. As such, the soaring demand for EVs is expected to offer steady support to silver price in the medium to long-term. For instance, General Motors sold over 19,000 EVs in July, equating to a 115% surge year-on-year. Besides, in its last reported quarter, its sales more than doubled. 

At the global level, IEA expects EV sales to increase by 25% in 2025; a similar growth rate as in 2024. At the end of the year, China will likely have sold over 14 million electric cars; a figure greater than the EVs sold across the globe in 2023.     

Silver price technical analysis

Silver price chart | Source: TradingView

About two weeks ago, silver price rallied to a fresh 14-year high as optimism and gold’s rallying bolstered it to the overbought territory at an RSI of 72. The subsequent correction had the asset drop in price by close to 10%. However, it has remained within the bullish channel as a rebound is underway. 

A look at its daily chart shows silver price trading above the medium-term 50-day EMA while hovering around the short-term 25-day EMA. In the near term, I expect the support zone along the 50-day MA at 36.50 to remain strong. 

The RSI of 50 point to possible consolidation in the near term even as the bulls remain in control. At its current level, the bulls are striving to break the resistance at $37.63. If successful, the gains will likely be capped at 38.50. However, this thesis will be invalidated by a move below the crucial support zone of $36.50.