Silver Price Forecast: XAG/USD edges higher to near $36.50 due to safe-haven demand

Silver price gains ground amid increased safe-haven demand, driven by the renewed trade concerns.
Trump’s new letters detail individual tariff rates ranging from 20% to 50% on eight countries, taking effect starting August 1.
The demand for the dollar-denominated Silver rises due to a weaker US Dollar.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) halts its three-day losing streak, trading around $36.50 per troy ounce during the Asian hours on Thursday. The safe-haven Silver gains ground due to the renewed trade concerns, driven by a new wave of tariff demand letters from US President Donald Trump on Wednesday

Traders adopt caution amid sparking concerns about a renewed global trade war as Trump’s letters outline individual tariff rates ranging from 20% to 50% for eight countries starting August 1. Additionally, Trump has also announced the new 50% tariff on US copper imports, which will take effect on August 1, per Reuters.

The dollar-denominated Silver is also supported by a weaker US Dollar (USD), which makes the metal more affordable for buyers using foreign currencies. The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, extends its losses for the second successive session and is trading at around 97.40 at the time of writing.

The Federal Open Market Committee (FOMC) Minutes from the June 17–18 meeting, released on Wednesday, indicated that policymakers largely maintained a wait-and-see stance regarding future interest rate decisions. The minutes also indicated that Fed officials were divided on the timing and extent of potential interest rate cuts. Most policymakers expected some easing later this year, views ranged from backing a reduction as early as July to favoring no cuts at all by year-end.

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

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.

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