Silver Price Forecast: XAG/USD dips to near $82.50 on profit-taking, US Retail Sales data in focus

Silver price attracts some sellers to near $82.65 in Tuesday’s Asian session, down 1.50% on the day.
Renewed US Dollar demand could weigh on the Silver price, but safe-haven demand might cap its downside.
Traders will take more cues from the US Retail Sales data on Tuesday, ahead of the US jobs report.

Lallalit Srijandorn FXStreet

Silver price (XAG/USD) falls to around $82.65 during the Asian trading hours on Tuesday, pressured by a modest rebound in the US Dollar (USD). Traders book some profits from recent price run-ups while reassessing the strength of the economy and inflation. The key US economic data will be published later this week, including delayed US employment data for January and inflation reports.

The upbeat US economic data released last week provided some support to the Greenback and weighed on the USD-denominated commodity price. Consumer confidence in the US improved slightly in February, with the University of Michigan's Consumer Sentiment Index rising to 57.3 from 56.4 in January. This figure came in above the market consensus of 55.

However, geopolitical tensions and uncertainty could boost a safe-haven asset such as Silver. Iran’s President Masoud Pezeshkian described last week's nuclear talks with the US as “a step forward,” even as he pushed back against any attempts at intimidation. Meanwhile, the risks remain, as the Iranian foreign minister also stated that the country will strike US bases in the Middle East if it is attacked by US forces.

The release of the US Retail Sales data will be in the spotlight on Tuesday. The figure is expected to show an increase of 0.4% MoM in December, compared to 0.6% in November. Traders will shift their attention to the delayed employment report for January, which is due on Wednesday. Markets forecast the Nonfarm Payrolls (NFP) to increase by 70,000 in January, with the Unemployment Rate holding at 4.4%. Any signs of weakening in the US labor market and softer inflation could underpin the white metal 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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