Silver Price Forecast: XAG/USD holds below $28.50 as traders brace for US PMI data

Silver price trades with mild losses around $28.25 in Thursday’s early Asian session.
The US August Nonfarm Payrolls (NFP) will be closely watched on Friday.
USD rebound and China’s growth pessimism drag the Silver price lower, but firmer Fed rate cut bets might cap its downside.

Lallalit Srijandorn FXStreet

Silver price (XAG/USD) trades with a mild bearish bias near $28.25 on Thursday during the early Asian session. The modest recovery of the US Dollar (USD) weighs on the white metal. However, the rising speculation that the US Federal Reserve (Fed) will cut a deeper interest rate in its upcoming meeting this month might help limit Silver’s losses.

The weaker US JOLTS report released on Wednesday increased the odds for a 50 basis points (bps) rate cut by the Fed. According to the CME FedWatch tool, which acts as a barometer for the market's expectation of the Fed funds target rate, the chance of the Federal Reserve (Fed) cutting rates by 25 basis points (bps) at the September meeting is 57%, while the odds of the Fed cutting rates by 50 bps is 43%. The imminent Fed rate cuts might cap the precious metal’s downside in the near term as it makes XAG/USD cheaper for most buyers.

The US August Nonfarm Payrolls (NFP) will be in the spotlight on Friday, and it is expected to see 160,000 job additions in the US economy. In case of a weaker outcome, this could exert some selling pressure on the Greenback and lift the USD-denominated Silver price.

On the other hand, China’s growth pessimism and demand concerns might undermine the white metal as China is the top silver exporter globally. Bank of America Global Research analysts cut China’s Gross Domestic Product (GDP) forecasts from 5.0% to 4.8% in 2024. Meanwhile, the downbeat Chinese Caixin Services PMI contributes to the downside, dropping to 51.6 from 52.1 in July.

(This story was corrected on September 5 at 09:15 GMT to say that economists expect the US employers to have added 160,000 jobs in August, not 161,000.)

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

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