Silver Price Forecast: XAG/USD depreciates to near $29.00 due to China’s demand concerns

• Silver price depreciates as the slowing Chinese economy could negatively impact the industrial demand for the asset.
• The grey metal may limit its downside as challenges in mining production could lead to tighter supplies.
• The rising odds of the Fed reducing rates could support the demand for non-yielding assets like Silver.

Silver price (XAG/USD) continues its losing streak for the fourth consecutive day, trading around $29.20 per troy ounce during the Asian hours on Monday. The grey metal faces challenges due to a slowing Chinese economy, the world's largest manufacturing hub. China's industrial demand for Silver is significant, as it is essential in various applications such as electronics, solar panels, and automotive components.

However, Silver could limit its downside as supply could fail to keep pace. “Mining production has been affected by labor shortages and environmental regulations, leading to tighter supplies. According to the Silver Institute’s estimates, 2024 is expected to be the fourth consecutive year of a supply deficit, Business Standard cited Navneet Damani, group senior vice-president, head of commodities research, Motilal Oswal Financial Services.

Additionally, Silver prices may also find support as the dovish sentiment surrounding the Federal Reserve's policy stance could support the demand of the non-yielding asset. Lower interest rates could attract buyers toward assets like Silver. According to CME Group’s FedWatch Tool, the markets show a 91.7% probability of a 25-basis point rate cut at the September Fed meeting, up from 90.3% a week earlier.

Federal Reserve Bank of New York President John Williams stated on Friday that the long-term trends that caused declines in neutral interest rates before the pandemic continue to prevail. Williams noted, "My own Holston-Laubach-Williams estimates for r-star in the United States, Canada, and the Euro area are about the same level as they were before the pandemic," according to Bloomberg.