Silver Price Forecast: XAG/USD holds below $52.50 as easing trade tensions cap safe-haven demand

Silver price trades on a negative note around $52.35 in Tuesday’s early Asian session.
Trump admitted that the additional 100% tariffs he proposed on China were not sustainable.
Fed rate cut bets might help limit Silver’s losses.

Lallalit Srijandorn FXStreet

Silver price (XAG/USD) declines near $52.35 during the early Asian session on Tuesday. The white metal retreat from last week’s record high due to the safe-haven demand eased as trade tensions between the US and China softened. Traders will take more cues about the US interest rate path from the speech of Federal Reserve (Fed) Bank Governor Christopher Waller later on Tuesday.

Analysts believe that Silver might decline on profit-booking, as traders cash in on their gains. Additionally, US President Donald Trump on Friday sought to ease trade tensions with China, saying that his proposed 100% tariff on goods from China would not be sustainable. His softer tone and confirmation of his intention to meet with Chinese President Xi Jinping this week help to mitigate trade tensions between the world’s two largest economies. This, in turn, dampens the safe-haven demand and drags the Silver price lower.

On the other hand, Fed rate cut expectations and dovish comments from Fed officials might lift the white metal. Fed Governor Christopher Waller said that he is on board for another interest rate cut at the Fed's meeting later this month, citing the mixed readings on the state of the job market.

Meanwhile, St. Louis Fed President Alberto Musalem said that he could support a path with another rate cut if more risks to jobs emerge and inflation is contained. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding precious metal.

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.

GBP/USD clings to gains near 1.3400

GBP/USD retreats after reaching a three-week high above 1.3430, challenging the 1.3400 yardstick on Thursday. Although easing political uncertainty in the UK helps the quid limit its downside, escalating tensions in the Middle East support the Greenback, keeping Cable under scrutiny.

EUR/USD faces resistance around 1.1450

EUR/USD keeps the bid bias although it seems to have met a tough hurdle around 1.1450 on Thursday. The pair’s advance follows the bearish tone in the US Dollar despite escalating tensions in the Middle East and a broad-based cautious stance from market participants.

Gold flirts with two-day highs, approaches $4,130

Gold stages a modest rebound on Thursday, setting aside a three-day losing streak and managing to surpass the $4,100 mark per troy ounce. However, steady geopolitical tensions have revived concerns over persistently high global inflation, reinforcing expectations of higher rates across the board and somewhat curtailing the yellow metal’s upside potential.

Bitcoin stalls as mixed ETF flows, renewed US-Iran tensions cap upside

Bitcoin trades at $63,000 on Thursday, recovering slightly after facing rejection near $64,000. Renewed geopolitical uncertainty has dampened risk appetite, limiting BTC upside potential.

Japan may be changing its Yen strategy, but markets don’t look scared

Japan may be changing its intervention playbook, but that might not be enough to rescue the battered Yen. With USD/JPY hovering at four-decade highs, the currency’s weakness is being driven less by speculative pressure and more by a powerful structural force: the wide US-Japan rate gap.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.