Silver price forecast: XAG/USD climbs to near $38.00 as US-China tariff delays
- Silver price appreciates ahead of US inflation data due on Tuesday.
- The US Consumer Price Index is expected to climb 0.2% MoM in July, easing from the previous 0.3% gain.
- Silver is supported by growing expectations that the Fed will implement multiple rate cuts before the year’s end.
Silver price (XAG/USD) gains ground after registering around 2% losses in the previous session, trading around $37.80 per troy ounce during the European hours on Tuesday. The Silver attracts buyers after the US President Donald Trump announced late Monday to postpone the implementation of sweeping tariffs on China for an additional 90 days.
The decision came just hours before the previous agreement between the world’s two largest economies was set to expire. In response, China’s Commerce Ministry announced it would suspend additional tariffs on US goods for the same period, following Trump’s executive order extending the tariff truce.
It is important to note that Silver is essential in various industrial applications, such as electronics, solar panels, and automotive components. Given China's status as one of the world's largest manufacturing hubs, the country's industrial demand for Silver is significant.
The non-interest-bearing Silver also draws support from rising odds of the Federal Reserve (Fed) delivering multiple rate cuts by the end of this year. Investors may shift toward precious metals seeking better returns on their investments as the cost of holding Silver is lower, making it more attractive.
The higher Initial Jobless Claims and lower July’s Nonfarm Payrolls in the United States (US) have boosted the expectations for a Fed rate cut next month, with another possible move in December. Markets are now pricing in approximately 84% odds of a Fed rate cut at the September meeting, down from 90% a week ago, according to the CME FedWatch tool.
However, traders await the US consumer inflation data, due later in the North American session. Investors may adopt caution as the July US Consumer Price Index (CPI) is forecast to rise slightly, which could shape the Fed’s policy outlook.
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.
Author
Akhtar Faruqui
FXStreet
Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.
