Silver Price Forecast: XAG/USD extends recovery to near $90.50 on renewed US-Iran tensions
- Silver recovers further to near $90.50 on renewed tensions between the US and Iran.
- Kevn Warsh’s nomination for the Fed’s new Chairman led to a sharp decline in the Silver price.
- The Fed is expected to leave interest rates steady in the next two policy meetings.
Silver price (XAG/USD) recovers further on Wednesday, trades 6% higher to near $90.50 during the European trading session. The white metal strengthens as tensions between the United States (US) and Iran have renewed, following the drone attack by the Iranian military on Abraham Lincoln aircraft carrier in the Arabian Sea, according to a report from Reuters.
Investors tend to shift to the safe-haven fleet in times of geopolitical tensions, a scenario that boosts the appeal of precious metals, such as Silver.
The white metal has been trading higher from the previous day as it regained ground after crashing over 30% from its lifetime peak of $121.61. Silver price corrected vertically after United States (US) President Donald Trump nominated Kevin Warsh for the succession of Federal Reserve (Fed) Chairman Jerome Powell.
Investors took Warsh’s appointment as favorable for the US Dollar (USD), given his historical preference for a strong US Dollar in his prior term at the Fed.
Technically, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
In Wednesday’s session, investors will focus on the US ADP Employment Change and the ISM Services PMI data for January, which will be published during North American trading hours. The data will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.
According to the CME FedWatch tool, the Fed is unlikely to cut interest rates in its policy meetings in March and April.
Silver technical analysis
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XAG/USD trades higher to near $90.50 at the time of writing. The price holds below the 20-day Exponential Moving Average (EMA), now at $91.66, underscoring a fresh bearish tilt as the average turns lower. The gauge's decline over recent sessions caps rebound attempts.
The 14-day Relative Strength Index (RSI) at 50.76 (neutral) is edging higher from prior readings, signaling stabilizing momentum.
A daily close back above the 20-day EMA would reduce downside pressure and open a recovery path towards the psychological level of $100.00. While, failure to reclaim the 20-day EMA would keep risks skewed lower as trend conditions soften.
(The technical analysis of this story was written with the help of an AI tool.)
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
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
