Silver Price Forecast: XAG/USD holds gains above $83.00 as safe-haven demand surges
- Silver price hit a 10-day high of $84.02 on Monday.
- Precious metals gain as safe-haven demand rises amid escalating geopolitical tensions.
- Traders turn cautious as federal prosecutors open a criminal investigation into Fed Chair Jerome Powell.
Silver price (XAG/USD) extends its gains for the second successive day, trading around $83.10 per troy ounce during the Asian hours on Monday. Precious metals, including Silver, attract buyers as safe-haven demand rises amid escalating geopolitical tensions.
Investors closely watched nationwide protests in Iran, now in their third week and reportedly claiming hundreds of lives. US President Donald Trump warned Tehran against using force on demonstrators and signaled possible action if the crackdown intensifies, while Iranian officials cautioned against any US or Israeli intervention.
Bloomberg reported that European countries led by the UK and Germany are considering increasing their military presence in Greenland to bolster Arctic security. Germany may propose a joint NATO mission, while UK Prime Minister Keir Starmer has urged allies to strengthen efforts in the High North, following renewed remarks by US President Donald Trump calling for US ownership of Greenland.
Safe-haven demand for Silver also rises as traders turn cautious amid concerns surrounding the Federal Reserve. Federal prosecutors have opened a criminal investigation into Fed Chair Jerome Powell regarding the central bank's renovation of its Washington headquarters and whether Powell lied to Congress about the project's scope, the New York Times reported on Sunday.
Markets also assessed the likelihood of further Fed rate cuts after Friday’s jobs report showed job growth fell short of expectations. US Nonfarm Payrolls (NFP) rose by 50,000 in December, falling short of November's 56,000 (revised from 64,000) and came in weaker than the market expectation of 60,000.
Traders continue to price in two Fed rate cuts this year, though the central bank is widely expected to keep policy unchanged later this month. According to the CME Group's FedWatch tool, Fed funds futures continue to price in about a 95% probability that the US central bank will keep rates unchanged at its January 27–28 meeting.
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.
