Silver Price Forecast: XAG/USD falls toward $32.00 amid potential Russia-Ukraine ceasefire
- Silver price declined as optimism surrounding potential ceasefire talks between Russia and Ukraine dampened demand for safe-haven assets.
- President Trump announced that Ukraine and Russia are preparing to enter immediate ceasefire negotiations, possibly excluding US participation.
- Silver’s losses on Monday were partially offset by Moody’s decision to downgrade the US sovereign credit rating.
Silver price (XAG/USD) continues its decline for the third consecutive session, trading near $32.20 per troy ounce during Tuesday’s Asian session. The metal’s weakness comes as optimism over a potential ceasefire between Russia and Ukraine reduces demand for safe-haven assets.
Reuters reported that US President Donald Trump stated on Monday that following a call with Russian President Vladimir Putin, Ukraine and Russia are set to begin immediate ceasefire negotiations, potentially without US involvement. This development has pressured precious metals, including Silver, which typically benefit from geopolitical uncertainty.
Despite the downtrend, Silver's losses on Monday were somewhat cushioned after Moody’s downgraded the US sovereign credit rating from "Aaa" to "Aa1" last Friday, citing rising debt levels and interest burdens significantly higher than those of similarly rated peers. This move follows similar downgrades by Fitch in 2023 and S&P in 2011.
Recent US economic data—including softer Consumer Price Index (CPI) and Producer Price Index (PPI) readings—indicate cooling inflation, bolstering expectations for Federal Reserve rate cuts in 2025. Additionally, disappointing US Retail Sales figures have heightened concerns about sustained economic weakness, which could lend support to non-yielding assets like Silver.
According to the CME FedWatch Tool, markets now anticipate two Fed rate cuts this year, likely beginning in September. Investors will closely monitor upcoming speeches from Federal Reserve (Fed) officials for further insight into the central bank’s policy direction and the broader economic outlook.
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.
