Silver (XAG) Forecast: Gold Rally and China Stimulus Boost Silver’s Breakout Potential

Silver Surges as it Nears Multi-Year High, Stimulus Hopes Rise

Silver prices climbed sharply on Friday, moving within range of the multi-year high at $32.96 reached on October 4. A breakout above this level could trigger an advance toward $34.35, the highest level in 12 years. On the downside, strong support is anchored around $30.12 to $30.14, with the 50-day moving average providing further stability. Silver’s recent strength is driven by safe-haven demand and expectations of stimulus from China, alongside a bullish gold market.

China’s Weak Q3 Growth Spurs Stimulus Expectations

China’s economic growth slowed to 4.6% in the third quarter, its weakest pace since early 2023. While consumption and factory output in September beat expectations, the struggling property sector remains a key challenge. Chinese authorities have ramped up stimulus measures, and further action is expected to address the slowdown. Economists suggest that recent measures could help stabilize the economy in the coming quarters, although structural issues in real estate persist.

Housing, which represents 70% of Chinese household wealth, remains a drag on growth. New home prices fell at their fastest rate since 2015, highlighting ongoing weakness in the sector. Additionally, crude steel output—a barometer of construction activity—fell for the fourth straight month in September. Despite some positive industrial output data, analysts warn that China’s stimulus might not fully reverse these structural problems.

Gold Hits Record Highs as Geopolitical Risks Mount

Gold broke through the $2,700 mark for the first time on Friday, reaching an intraday high of $2,714.14. Rising geopolitical tensions in the Middle East, particularly the conflict between Israel and Hezbollah, have driven investors toward gold as a safe haven. This rally has bolstered silver as well, which tends to follow gold’s movements due to its dual role as a precious metal and industrial commodity. Silver benefits from gold’s strength, especially during periods of heightened uncertainty, as traders often seek both metals as safe-haven assets.

Gold has gained more than 2% this week, driven by expectations of further monetary easing and increased risk aversion. Silver, closely correlated with gold, has risen alongside, benefiting from the same market dynamics.

U.S. Treasury Yields and Dollar Strength Cap Silver’s Gains

U.S. Treasury yields held steady after data showed strong retail sales in September, signaling resilience in the U.S. economy. This has dampened expectations for immediate interest rate cuts, lending support to the U.S. dollar. The stronger dollar has curbed some of silver’s potential gains, as it makes the metal more expensive for international buyers. However, geopolitical risks and economic uncertainty continue to drive demand for precious metals.

Market Forecast

Silver appears poised to challenge its multi-year high of $32.96. If it breaks through, prices could climb toward $34.35 in the near term. Ongoing stimulus from China and geopolitical risks will likely provide further support, although strength in the U.S. dollar could limit upside potential. Traders should watch for further policy developments from China and any shifts in global risk sentiment, which could drive volatility in silver markets.