Silver Price Forecast: XAG/USD falls toward $72.00 on hawkish Fed outlook
- Silver struggles as rising energy prices strengthen hawkish expectations for major central banks’ policy outlooks.
- Trump set a Tuesday deadline for Iran to reopen the Strait of Hormuz, escalating threats against its civilian infrastructure.
- Fed may delay rate cuts and could raise borrowing costs later this year if inflation remains persistently elevated.
Silver price (XAG/USD) holds losses for the third successive day, trading around $72.20 per troy ounce during the Asian hours on Monday. The non-interest-bearing Silver is under pressure as escalating Middle East tensions have driven a sharp rise in energy prices, reinforcing hawkish expectations for major central banks’ policy outlooks. The white metal has also failed to receive support from increased safe-haven demand, weighed down by forced liquidations as investors cover losses in other markets.
US President Donald Trump issued a fresh ultimatum to Iran, warning of strikes on its power plants and other civilian infrastructure if the Strait of Hormuz is not reopened. Trump threatened severe consequences, saying he would bring “hell” to Iran, and set a new deadline for Tuesday at 8 PM Eastern Time. Tehran has rejected the ultimatum and continues attacks on energy assets across the Middle East.
Markets are increasingly pricing in the US Federal Reserve (Fed) to delay rate cuts, with the possibility of higher borrowing costs later this year if inflation remains persistent. Investors now turn their focus to the latest Federal Open Market Committee (FOMC) Meeting Minutes for clearer signals on the policy path ahead.
Meanwhile, the Bank of England (BoE) unanimously kept the Bank Rate unchanged at 3.75% in March, pausing its recent easing cycle amid rising inflation risks linked to higher energy costs driven by Middle East tensions. Some analysts expect rate cuts to be pushed back until late 2026 or even 2027, while others warn that a pre-emptive rate hike remains possible if inflation expectations become unanchored. Moreover, European Central Bank (ECB) President Christine Lagarde and other Governing Council members have reiterated that policy will stay restrictive until inflation sustainably returns to the 2% target.
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.
