(Kitco News) – Silver prices were ultimately able to follow gold higher in 2024, and the gray metal has a path to further gains in 2025, but the incoming Trump administration and the Fed’s rate trajectory still have the potential to surprise, according to IG market strategist Yeap Jun Rong.
“While robust central bank demand has been a significant driver for gold, it plays a less prominent role for silver,” Rong wrote in an analysis published Sunday. “Nonetheless, silver's performance over the past year has been comparable to that of gold. Silver prices have surged by 31.2% year-on-year, closely mirroring gold's 31.7% increase.”
Rong said the combination of the Federal Reserve’s recent hawkish turn, U.S. dollar strength and rising Treasury yields drove silver prices down from October’s decade-high levels.
“However, one may argue that this retracement has not disrupted silver's broader higher-lows formation just yet,” he said. “Recent positive US economic surprises have led market participants to recalibrate their rate cut expectations to lean towards only a single cut this year, which is less dovish than the previously guided median estimate of two cuts by US policymakers. Inflation risks are coming into focus, with economic data signalling for potential reflation, further underscored by anticipation of a Trump 2.0 administration.”
Rong believes that much of the impact of Trump’s potential policies and the Fed’s rate trajectory may already be priced in, but this still leaves room for surprises. “We have seen this on 6 January,” he said, “when an unverified Washington Post report suggesting Trump might scale back tariffs triggered a more than 1% drop in the US dollar before it rebounded following his denial.”
“Ahead, any softer US economic data or a lack of follow-through in Trump’s policies could drive some unwinding in the US dollar or a pullback in US Treasury yields, which may offer potential tailwinds for non-yielding assets like silver,” he added.
Rong said the longer-term supply-demand dynamics appear to offer a supportive backdrop for prices. “Data from Metals Focus highlights stagnating supply alongside steadily improving demand in recent years,” he noted. “While these trends may take time to exert a significant impact on prices, the evolving fundamentals are worth monitoring closely.”
Even though silver prices hit ten-year highs in October, Rong wrote that “money manager positioning and silver exchange traded fund (ETF) holdings remain far from excessive,” so given the right catalysts, there is potential for catch-up buying in the market.
“The latest Commodity Futures Trading Commission (CFTC) data suggests that money managers’ positioning in silver contracts are still below their 10-year historical average, while holdings in the iShares Silver Trust ETF are still significantly below its 2022 high,” he said.
Turning to the technical picture, Rong noted that silver prices are showing a near-term descending wedge pattern, with upper trendline resistance near the $31 level. “A breakout above this level could signal stronger buyers’ control, potentially opening the door for a retest of the $32.55 mark, where the upper boundary of the Ichimoku Cloud resistance lies,” he wrote.
While market sentiment surrounding silver appears to be improving, Rong said the gray metal must maintain key support. “Buyers are attempting to invalidate the head-and-shoulders breakdown observed on December 19, which is a positive sign,” he said, “but maintaining support above the key psychological level of $30 will be crucial for sustaining this upward momentum.”
Silver prices have started the week on a down note, with spot silver falling to a session low of $29.542 per ounce around 7:30 am EST.
Spot silver last traded at $29.743 for a loss of 2.11% on the daily chart.
