Silver Price Forecast: XAG/USD holds gains near $80.50 on Japan-led reflationary trades
- Silver price gains as Japan's PM Takaichi’s election victory bolsters expectations of expansionary fiscal policy.
- Silver’s safe-haven demand remains firm despite US–Iran talks in Oman on Friday aimed at easing regional tensions.
- The grey metal rises as markets await key US data for clearer signals on the Fed’s rate outlook.
Silver price (XAG/USD) gains ground for the second successive session, trading around $80.80 per troy ounce during the Asian hours on Monday. The grey metal advances amid market caution ahead of key US economic data that could provide clearer guidance on the Federal Reserve’s (Fed) interest-rate outlook. The January jobs report, due Wednesday, is expected to signal stabilization in the labor market, with the US economy forecast to add 70,000 jobs, while the Unemployment Rate is seen holding steady at 4.4%.
Markets currently expect the Fed to keep interest rates unchanged in March, with potential rate cuts anticipated in June and possibly September. San Francisco Fed President Mary Daly said in a LinkedIn post on Friday that the economy may remain in a low-hiring, low-firing environment, though it could also shift toward a no-hiring, higher-firing phase.
Fed Governor Phillip Jefferson said future policy decisions will be guided by incoming data and assessments of the economic outlook, adding on Friday that the labor market is gradually stabilizing. Meanwhile, Atlanta Fed President Raphael Bostic noted that inflation has remained elevated for too long, stressing in a Bloomberg interview on Friday that the Fed cannot lose sight of inflationary risks.
Silver, a traditional hedge against inflation, finds support following the landslide victory of Prime Minister Sanae Takaichi’s ruling coalition in Japan’s weekend elections. This result strengthens the case for expansionary fiscal policies. Such policies tend to lift inflation expectations, underpinning demand for the precious metal.
Safe-haven demand for Silver also remains resilient despite the United States (US)–Iran talks held in Oman on Friday aimed at easing regional tensions. However, Tehran reiterated that it would not suspend nuclear fuel enrichment, with Foreign Minister Abbas Araghchi noting that further negotiations depend on consultations in Washington and Tehran and must proceed without threats. Meanwhile, US President Donald Trump said another round of talks is planned this week, warning of “very steep” consequences if an agreement is not reached.
(The story was corrected on February 9 at 2:40 GMT to say in the title that XAG/USD holds gains near $80.50 on Japan-led reflationary trades, and not on the Japanese election.)
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.
