Silver Price Forecast: XAG/USD drifts higher to near $41.00 on odds of bigger Fed rate cut
- Silver price edges higher to near $41.00 in Wednesday’s Asian session.
- Expectations of a Fed rate cut and a softer US Dollar support the Silver price.
- Traders await the US August PPI inflation data, which is due later on Wednesday.
The Silver price (XAG/USD) attracts some buyers to around $41.00 during the Asian trading hours on Wednesday. The white metal edges higher amid a weaker US Dollar (USD) and the escalating tension in the Middle East. Traders will take more cues from the US Producer Price Index (PPI) inflation data for August later on Wednesday.
Annual revisions to Nonfarm Payrolls (NFP) data for the year prior to March 2025 showed a fall of 911,000 from the initial estimate. This report indicated a far weaker labor market than what initial numbers showed in that 12-month period, adding to concerns both about the health of the US economy and boosting the expectations of a US Federal Reserve (Fed) interest rate cut. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding white metal.
Furthermore, rising geopolitical tensions in the Middle East could boost the safe-haven flows and undermine the Silver price. Israel launched a strike on Doha, Qatar, targeting the senior leadership of Hamas, Bloomberg reported on Tuesday. Qatar officials said the attack by Israel violated international law and threatens to widen the conflict in the Middle East.
The US August PPI inflation report on Wednesday could offer some hints about the Fed's interest rate path. Economists expect the headline PPI to show an increase of 3.3% YoY in August, while the core PPI is projected to show a rise of 3.5% YoY during the same period. If the report shows a surprise uptick in inflation, this could lift the Greenback and weigh on the USD-denominated commodity price in the near term.
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
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.
