Silver Price Forecast: XAG/USD holds gains above $31.50 near two-month highs
- Silver price appreciates as traders assess the potential impact of uncertain US trade policies on the global economy.
- The US tariffs on Mexican and Canadian goods have been postponed for at least 30 days after two days of implementation.
- The non-interest-bearing Silver receives support amid dovish signals from major central banks.
Silver price (XAG/USD) continues its upward momentum, reaching near two-month highs and trading around $31.60 per troy ounce during Asian trading hours on Tuesday. Safe-haven metals, including Silver, are gaining ground as traders assess the potential impact of uncertain United States (US) trade policies on the global economy.
On Monday, US President Donald Trump announced a temporary suspension of tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 troops to the US border to combat drug trafficking. The tariffs initially imposed two days earlier—25% on Mexican and Canadian goods have been postponed for at least 30 days. China stands alone in facing the new Trump levies. The world’s largest consumer of commodities is due to be hit with across-the-board tariffs of 10% that begin at 05.00 GMT on Tuesday.
Silver, a non-interest-bearing asset, continues to hold its gains amid dovish signals from major central banks. The Bank of Canada (BoC) has ended its quantitative tightening and joined Sweden’s Riksbank in cutting interest rates. Last week, the European Central Bank (ECB) lowered its Deposit Facility Rate by 25 basis points (bps) to 2.75%, and both the Reserve Bank of India (RBI) and the People’s Bank of China (PBoC) have indicated possible rate cuts ahead. Markets are also anticipating two rate cuts from the US Federal Reserve (Fed) this year.
Economic data released by the Institute for Supply Management (ISM) on Monday showed that the US Manufacturing PMI rose to 50.9 in January, up from 49.3 in December, surpassing expectations of 49.8. The stronger-than-expected data suggests renewed momentum in US factory activity, reinforcing Silver’s outlook as a key industrial metal, particularly in electrification technologies.
The Silver Institute recently projected a fifth consecutive year of significant market deficits for silver supply in 2025, driven by strong industrial demand and retail investment. These factors are expected to outweigh weaker consumption in the jewelry and silverware sectors.
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.
