Silver Price Forecast: XAG/USD drifts higher to near $42.00 as Fed cuts rates
- Silver price edges higher to near $41.90 in Friday’s Asian session.
- Fed rate cut and stronger global demand support the Silver price.
- Easing geopolitical risks might cap the upside for XAG/USD.
The Silver price (XAG/USD) gains ground to around $41.90 during the Asian trading hours on Friday. The white metal finds support from the US Federal Reserve (Fed) rate cuts.
As widely expected, the Fed decided to cut its benchmark interest rate at its September meeting on Wednesday, the first time since December, and signaled more reductions are likely this year. Fed Chair Jerome Powell pointed to growing signs of weakness in the labor market to explain why officials decided it was time to cut rates after holding them steady since December amid concerns over tariff-driven inflation. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding white metal.
Strong support from global demand, especially from industrial use in photovoltaics, where China dominates, might contribute to Silver’s upside. Saudi Arabia’s sovereign wealth fund has been buying silver ETFs, while sentiment around commodities is improving on a weaker US Dollar (USD) outlook.
On the other hand, the easing of geopolitical tensions between Russia and Ukraine could improve the sentiment and weigh on the safe-haven asset like Silver. US President Donald Trump admitted that he’d been surprised by how difficult the conflict between Russia and Ukraine had been to resolve. However, he stated during a press conference with UK Prime Minister Keir Starmer that he hopes to have some good news from both sides.
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.
