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Silver Price Forecast: XAG/USD falls to near $66.00 amid Middle East tracking

  • Silver price slips as investors monitor Middle East developments and assess impacts on inflation and interest rates.
  • Crude oil dropped due to hopes of diplomacy, though ongoing Ukrainian and Yemeni strikes restrained downside pressure.
  • US President Trump signaled openness to meeting Iranian President Pezeshkian and other leaders at the UN General Assembly.

Silver price (XAG/USD) remains subdued after two days of gains, trading around $65.80 per troy ounce during the early European hours on Monday. Non-yielding Silver eased as investors continued to track developments in the Middle East and assess their potential impact on inflation and interest rates.

Crude oil prices fell on growing hopes that increased diplomatic efforts could help end the Middle East conflict and restore stable energy flows from the region. A significant factor behind this optimism is US President Donald Trump stating he would "probably" be open to meeting Iranian President Masoud Pezeshkian on the sidelines of the United Nations General Assembly in New York this week. Alongside this potential encounter, Trump may meet with other Persian Gulf leaders and is scheduled to hold a summit with Chinese President Xi Jinping.

However, the downside of oil prices could be restrained amid ongoing geopolitical tensions. Ukraine launched a massive overnight drone and missile assault targeting Moscow and its surrounding region, according to BBC reports. Meanwhile, Yemen’s Houthis claimed responsibility for missile and drone strikes against "sensitive" locations in the Saudi capital of Riyadh, as reported by the Guardian on Saturday, following sightings of flames and heavy smoke near the city's main airport.

Last week, the US Federal Reserve implemented a 25-basis-point rate hike, its first in three years, aiming to curb inflation while signaling additional increases ahead. According to the CME FedWatch tool, markets now price in a 56.5% probability of another rate hike at the October meeting, up from 42.5% the prior week. Emphasizing the central bank's stance, Fed Chair Kevin Warsh stated that inflation remains unacceptably high and that recent summer readings show no meaningful improvement in underlying trends.

Kashkari keeps hawkish bias as resilient growth complicates Fed’s inflation fight

Kashkari’s latest remarks score 6.2 on the FXS Speechtracker, essentially in line with the 6.3 historical average and signaling a steady hawkish tone. The emphasis that inflation “remains too high,” extends beyond oil, and must be addressed even as growth and productivity stay robust underscores a message of persistent policy vigilance rather than imminent easing. References to a resilient American economy and a robust labor market reinforce the idea that the Fed can maintain restrictive policy for longer without immediate concern for growth.

The FXS Fed Sentiment Index fell by 1.47 points to 150.61, indicating a modest softening in perceived hawkishness while remaining firmly above the neutral 100 mark. This configuration suggests that, despite a slight pullback in tone captured by the FXS Speechtracker, the overall policy stance remains clearly hawkish in the context of resilient growth and still-elevated inflation.

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

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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