Silver Price Forecast: XAG/USD holds onto gains around $87, ignoring hawkish Fed bets
- Silver price posts fresh two-month high, slightly below $88, despite escalating hawkish Fed bets.
- Higher-than-expected US CPI data boosts hawkish Fed bets and strengthens the US Dollar.
- Investors await the Trump-Xi meeting in Beijing later this week.
Silver price (XAG/USD) trades firmly near $87.00 in the early European trade on Wednesday. Earlier in the day, the white metal posted a fresh two-month high of $87.82. The white metal reflects strength even as hot United States (US) Consumer Price Index (CPI) data for April has prompted fears of interest rate hikes by the Federal Reserve (Fed) this year.
As measured by the CPI, the US headline inflation accelerated to 3.8% Year-on-Year (YoY) from 3.3% in March. The inflation data was expected to rise further, but at a slower pace to 3.7%. The US core CPI – which excludes volatile food and energy items – grew at an annualized pace of 2.8%, faster than 2.7% estimates and the previous reading of 2.6%.
According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike this year have increased to 35.3% from 23.5% seen before the US CPI data release.
Theoretically, rising hawkish Fed bets bode poorly for non-yielding assets, such as Silver.
Higher-than-projected US inflation data has also strengthened the US Dollar (USD). As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near its weekly high of 98.46 posted on Tuesday. Technically, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
Meanwhile, investors await the meeting between US President Donald Trump and Chinese leader Xi Jinping during Trump’s visit to Beijing on May 13-15.
In India, the Multi Commodity Exchange (MCX) Silver July Futures have gained over 6% above Rs. 3,00,000, as the Indian government has hiked import duty on Gold and Silver to 15% from 6%, in an attempt to discourage the purchase of precious metals due to ease pressure on the nation’s foreign exchange reserves.
Silver technical analysis
XAG/USD trades firmly at around $87 as of writing. On the daily chart, the pair extends its advance well above the 20-day Exponential Moving Average (EMA) at $78.68, suggesting a firm bullish near-term bias as price holds comfortably over dynamic support.
The Relative Strength Index (14) hovers near 66, indicating strong but not yet extreme upside momentum that reinforces the broader constructive tone while leaving room for further gains.
On the downside, initial support is seen at the 20-day EMA around $78.68, followed by the May 1 high around $77. As long as XAG/USD remains above the EMA floor and momentum readings stay elevated, the technical setup favors dips being bought. Looking up, the Silver price could gain further towards $90 if it manages to break above its intraday high of $87.82; a close above that would open room for further advancement towards the March high of $96.62.
(The technical analysis of this story was written with the help of an AI tool.)
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
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
