Silver Price Forecast: XAG/USD falls to near $65.50 amid US-Iran peace uncertainty
- Silver weakens as Trump’s refusal to renew the Iran deal and naval blockades elevate global geopolitical tensions.
- Weak US payrolls and modest inflation trim expectations for a Fed interest rate hike.
- CME FedWatch shows Fed rate hike expectations falling to 35% for the September meeting, down from 47% last month.
Silver price (XAG/USD) declines after two days of gains, trading around $65.60 per troy ounce during the Asian hours on Tuesday. Silver prices fall as traders remain wary of potential inflation risks as prospects for a new diplomatic agreement between the US and Iran dimmed following statements from both sides.
US President Donald Trump indicated he was not interested in extending the interim peace deal, citing the ongoing naval blockade of Iranian ports as evidence of Washington's leverage and reiterating his proposal to declare the critical waterway as US territory under total American control. Iranian Foreign Ministry spokesman Esmail Baghaei asserted that an agreement remains elusive due to security complexities and the "obstructionist behavior of destructive elements," insisting that the US must first lift its blockade.
However, Silver prices could rebound amid fading expectations for further interest rate hikes by the Federal Reserve (Fed). A recent, unexpected decline in July US Nonfarm Payrolls, combined with last week's modest consumer price inflation data, has significantly reduced market anticipation of a monetary tightening next month.
Consequently, expectations for a Fed rate hike at the upcoming policy meeting have dropped to 35%, down from 47% a month earlier, according to the CME FedWatch Tool. Investors are now looking ahead to the release of the minutes from the Fed’s July meeting.
According to strategists at TD Securities, a confluence of macro factors has driven a notable repositioning in precious metals. They highlight that “the combination of modest inflation, a lackluster U.S. employment environment, little market concern that oil will have another major rally, along with prices moving convincingly into a higher trading range prompted money managers to aggressively increase their long gold exposure.” This backdrop, in their view, has encouraged investors to lean more heavily into Gold as prices establish themselves in a stronger trading band.
Technical Analysis:
In the daily chart, XAG/USD trades at $65.60, holding a bullish near-term bias as price remains above both the nine-day and 50-day Exponential Moving Averages (EMAs). The alignment of the shorter EMA above the longer one reinforces a constructive trend tone, while the 14-day Relative Strength Index (RSI) at 60.51 stays in positive territory without yet signaling overbought conditions, suggesting room for further gains as long as the metal holds above these dynamic supports. The Fed Sentiment Index cooling toward 134.61 hints at a less aggressive policy backdrop for Silver.
On the downside, immediate support is located at the nine-day EMA at $64.27, followed by the 50-day EMA at $63.33, with a more distant structural floor at the horizontal line near $55.63. On the topside, the next notable barrier emerges at the horizontal resistance around $90.03, with the current configuration hinting that dips toward the clustered moving averages may attract buyers while that upper cap remains untested.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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
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.
