Silver Price Forecast: XAG/USD gains momentum above $36.00 on risk-off sentiment
- Silver price gains ground to around $36.10 in Monday’s early Asian session.
- US attacked Iran over the weekend, boosting the white metal.
- The preliminary US S&P Global PMI for June is due later on Monday.
The Silver price (XAG/USD) edges higher to near $36.10, snapping the three-day losing streak during the Asian trading hours on Monday. The white metal attracts some buyers amid the rising tensions in the Middle East after the US bombed Iran's nuclear sites.
The United States carried out airstrikes on three nuclear sites in Iran early Sunday despite US President Donald Trump’s longtime promises to avoid new foreign conflicts. Iran has vowed to respond, saying it “reserves all options,” while Trump said that any Iranian retaliation against the United States “will be met with a force far greater than what was witnessed tonight.” Any signs of escalation could increase demand for safe-haven assets, such as Silver.
Federal Reserve (Fed) Governor Christopher Waller said on Friday that the Fed is in a position to cut the policy rate as early as July. The dovish remarks from Federal Reserve (Fed) officials provide some support for the white metal. Lower interest rates make silver cheaper for foreign buyers, increasing global demand.
On the other hand, renewed US Dollar (USD) demand might cap the upside of Silver. Investors await the preliminary reading of the US S&P Global PMI for June. If the US economic data came in stronger than expected, this could underpin the Greenback in the near term.
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
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
