Silver Price Forecast: XAG/USD attracts some buyers to near $34.00 on economic uncertainty, geopolitical risks

Silver price gains momentum to around $33.90 in Tuesday’s Asian session, adding 0.16% on the day.
Heightened economic uncertainty, geopolitical risks and rising demand underpin the Silver price.
The Fed interest rate decision will be the highlight on Wednesday.

Lallalit Srijandorn FXStreet

Silver price (XAG/USD) extends its upside to around $33.90, its highest level since October 30, 2024, during the Asian trading hours on Tuesday, bolstered by the weaker US Dollar (USD). The escalating geopolitical tensions in the Middle East, economic uncertainty and growing industrial demand provide some support to the white metal.

The mounting fears of a recession in the United States (US) and persistent uncertainty over trade relations weigh on investor sentiment, boosting safe-haven assets like Silver. Late Monday, US President Donald Trump said that he would be imposing both broad reciprocal tariffs and additional sector-specific tariffs on April 2. Trump has already imposed a 20% tariff rate in China and a 25% levy on steel and aluminum. He also announced a 25% tariff on Canadian and Mexican goods.

Additionally, the rising geopolitical risks in the Middle East contribute to the Silver price’s upside. Israeli Prime Minister Benjamin Netanyahu said on Tuesday that Israel resumes military operations against Hamas across the Gaza Strip, adding that the country will act against the militant group with increasing military force.

Supply deficits and growing industrial demand create a strong tailwind for the white metal. According to the global investment company WisdomTree, investors own a significant portion of it and expect higher prices to encourage sales. Silver's industrial demand has reached all-time highs, owing to its use in photovoltaic applications, 5G technology, and automotive electronics.

The Federal Reserve (Fed) interest rate decision will be closely monitored on Wednesday. The US central bank is expected to hold its benchmark interest rate unchanged in a range of 4.25% to 4.50% at the March meeting. The primary focus will be on the Fed's policy guidance. Any hawkish remarks from Fed officials could lift the Greenback and undermine the USD-denominated commodity price in the near term.

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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