Silver Price Forecast: XAG/USD rebounds above $44.00 near 14-year highs
|- Silver price holds near Tuesday’s 14-year high of $44.47 amid rising Fed rate cut bets.
- CME FedWatch tool indicates nearly a 93% possibility of a Fed rate cut in October.
- Safe-haven Silver receives support from rising geopolitical tensions after NATO vowed a “robust” response to Russian airspace violations.
Silver price (XAG/USD) recovers its daily losses, trading around $44.10 per troy ounce during the European hours on Wednesday. The non-interest-bearing Silver maintains its position near a 14-year high of $44.47, which was reached on Tuesday as traders widely expect a 25-basis-point rate cut by the US Federal Reserve (Fed) at its October policy meeting.
The CME FedWatch tool suggests that money markets are currently pricing in nearly a 93% possibility of a Fed rate cut in October, up from 90% a day earlier. Traders will likely observe the upcoming US Q2 Gross Domestic Product Annualized and Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve’s preferred inflation gauge, due later in the week.
Safe-haven Silver draws buyers as geopolitical tensions rise, with NATO vowing a “robust” response to Russian airspace violations. Moreover, President Trump warned at the United Nations (UN) General Assembly on Tuesday that the United States (US) is ready to impose a “very strong round of powerful tariffs” if Russia refuses to end the war in Ukraine.
Additionally, Silver found support from strong fundamentals, with tight supply and steady demand from solar, EV, and electronics sectors underpinning prices. India’s silver imports are also set to rise in the coming months, backed by solid investment and industrial demand that has already absorbed last year’s surplus shipments.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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