Silver Analysis: The strong upward trend continues, can it break through $40 in the future?

On Friday (July 18), the price of spot silver (XAG/USD) showed a trend of first oscillation and then a sharp rise on the time-sharing chart. Especially after 13:30 pm, the price broke through the previous oscillation range and formed a clear upward trend. During the session, it was reported at $38.382/ounce, an increase of 0.72%.

Silver has shown a strong upward trend recently, and the price has entered a high consolidation stage after breaking through the key resistance level of $37.50. According to the latest market data, the price of silver has risen by 24.82% in the year to July 17, far exceeding the performance of gold in the same period.

From a technical standpoint, silver has formed solid support near $37.00, with the 50-day moving average (EMA50) providing dynamic support, indicating that bullish momentum continues to dominate the market in the short term.

Fundamental Analysis Driven by Industrial Demand

The strong performance of silver is due to its dual properties as an industrial metal and a safe haven asset. The Silver Institute forecasts that the silver market will experience a supply-demand gap for the fifth consecutive year in 2025, with industrial demand expected to reach a record high of more than 700 million ounces. Demand in the photovoltaic industry continues to grow, and global solar installations are expected to reach a new high in 2025, despite possible policy pressure from the Trump administration on US renewable energy projects. Electrification trends in the automotive industry and demand for 5G technology and artificial intelligence-related electronics are further driving up silver usage.

Safe-haven demand and geopolitics

Geopolitical tensions and economic uncertainty have provided safe-haven support for silver. The Trump administration's tariff policy, which will take effect on August 1, has exacerbated global trade tensions, prompting investors to turn to precious metals to hedge their risks.

Market sentiment shows that silver has attracted a lot of capital inflows due to its safe-haven properties and industrial demand, especially in the Indian market. In June, the inflow of silver ETF funds reached 20.04 billion rupees, an increase of 135% year-on-year.

In addition, market rumors that the Russian central bank may be pushing up silver prices through undisclosed large-scale purchases have further strengthened the bullish sentiment.

Macroeconomic background

US economic data are important for silver prices. June's flat producer price index (PPI) was below expectations of a 0.2% increase, strengthening market expectations for the Federal Reserve to cut interest rates in September (the current interest rate range is 4.25% -4.50%). Expectations of rate cuts weaken the attractiveness of the dollar and could provide further support for silver prices.

However, Mr. Trump's tariffs could trigger inflationary pressures and increase market volatility. A slowing global economy could damp some industrial demand, but the banking association expects structural growth in green economy applications to offset this.

brokerforecast

Several institutions are optimistic about silver prices in 2025.

Citigroup forecasts that silver prices will reach $40 in three months and $43 in six to 12 months, emphasizing the supply-demand gap and industrial demand support.

ANZ Research forecasts an average price of $35.40 per ounce in 2025, based on macroeconomic and industrial factors.

UBS: Price forecasts range from $36 to $38 per ounce, emphasizing green technology demand.

TD Securities: Expected to reach $36/ounce in the fourth quarter of 2025.

technical analysis

(Daily chart of spot silver, source: Yi Huitong)

After recently breaking through the resistance level of $37.50, silver tested the high of the year at $37.12 (June 17). If the price can stabilize above $37.50, the next target level may point to $39.50, or even break through the psychological level of $40.00.

The daily chart shows that the Relative Strength Index (RSI) is close to overbought territory, but there is no significant divergence yet, suggesting there is still room for upside in the near term. A break above $40.00 could trigger further inflows, pushing prices to test Citi's forecast of $43.00 (6- to 12-month target).

If the price retreats, $37.00 is the primary support level, and a further test of $35.00 (50-day EMA and key psychological level) is possible after a fall. Stronger support is located in the range of $33.00 to $34.00. A fall below this area may trigger a deeper correction, but the bearish momentum is currently weak, and the market still tends to "buy the dip".

Trading Strategy

Buy the dip: Look for buying opportunities in the $37.00 to $35.00 range, with stops below $34.50 and a target price of $39.50 to $40.00.

Break through to chase long: If the price breaks through $37.50 and stands firm, you can consider chasing long, targeting $40.00, with a stop loss set at $37.00.