Silver Price Forecast: XAG/USD falls to near $77.50 as Hormuz tensions lift inflation
- Silver price struggles as the Strait of Hormuz blockade keeps energy prices and inflation risks elevated.
- Iran continues to assert control over the Strait of Hormuz, restricting transit and targeting vessels.
- Reuters survey indicates that 56 of 103 economists expect the Fed to hold rates at 3.5%–3.75% through September.
Silver price (XAG/USD) declines after registering modest gains in the previous day, trading around $77.60 per troy ounce during the Asian hours on Thursday. Non-yielding Silver remains under pressure as traders continue to grapple with heightened uncertainty in the Middle East and the ongoing blockade of the Strait of Hormuz, which has kept energy prices elevated and inflation risks persistently high.
Iran continues to assert control over the Strait of Hormuz, restricting transit and targeting vessels. Iranian parliament speaker and chief negotiator Mohammad Bagher Ghalibaf stated that reopening the strait would be “impossible” while the United States (US) and Israel persist with what he described as “flagrant” ceasefire violations, including the US naval blockade. Meanwhile, President Donald Trump said the current truce would remain in place indefinitely as Washington awaits a renewed peace proposal from Tehran.
According to the Wall Street Journal, Iran fired on three ships in the Strait of Hormuz and escorted two of them into Iranian waters on Wednesday. Iranian media reported that the paramilitary Revolutionary Guard was moving the vessels to Iran, marking a further escalation, although White House press secretary Karoline Leavitt said the seizures did not breach the terms of the ceasefire.
The white metal has remained under sustained pressure since the conflict began, as rising energy prices have intensified inflation concerns and reduced expectations for central bank rate cuts. A recent Reuters survey of economists showed that 56 out of 103 respondents expect the Federal Reserve (Fed) to keep its policy rate within the current 3.5%–3.75% range at least through September.
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.
