Silver Price Forecast: XAG/USD falls to near $33.50 despite increased safe-haven demand

Silver price may regain ground due to increased safe-haven demand amid uncertainties surrounding the US elections and geopolitical risks.
The latest Reuters/Ipsos poll indicates that Harris holds a narrow lead at 46% compared to Trump's 43%.
Silver prices may appreciate due to safe-haven demand amid uncertainties surrounding the geopolitical tensions in the Middle East.

Akhtar Faruqui FXStreet

Silver prices (XAG/USD) extends its losses for the second consecutive day, trading around $33.60 during the Asian hours on Thursday. However, the downside of the Silver price could be restrained amid increased demand for safe-haven assets amid uncertainties surrounding the US elections and geopolitical risks.

Former President Donald Trump has made gains among Hispanic men as the November 5 US presidential election approaches, where he will face Democratic candidate Kamala Harris. According to an analysis of Reuters/Ipsos polling, Trump is now trailing Harris by only 2%, with support at 44% compared to her 46%.

Meanwhile, Harris has seen increased support among white women. In late 2020, white women favored Trump over Biden by 12%, but now they lean Republican by a margin of 3%. The race between the two candidates is extremely close, with Harris holding a slight lead of 46% to 43% in the latest poll conducted from October 16 to 21.

Silver prices are likely to rise due to safe-haven demand as traders keep a close eye on escalating geopolitical tensions in the Middle East. This comes in the wake of Israel's military chief warning of a "very hard" strike on Iran if missile attacks continue. Lebanese Prime Minister Najib Mikati mentioned on Wednesday that US envoy Amos Hochstein indicated a possible ceasefire in the Israel-Hezbollah conflict could be achieved before the U.S. elections on November 5.

Additionally, investors are looking forward to China's parliamentary meeting scheduled for November 4-8, where announcements regarding potential stimulus measures from Beijing are anticipated. Reports indicate that China is considering a stimulus package exceeding 10 trillion Yuan to boost its economy.

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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