Silver Price Forecast: XAG/USD hovers near $44.00 near 14-year highs
- Silver price maintains its position 14-year high of $44.47.
- CME FedWatch tool indicates nearly a 92% possibility of a Fed rate cut in October.
- NATO warned Russia it would employ “all necessary military and non-military measures” to ensure its defense.
Silver price (XAG/USD) pares its recent losses from the previous session, trading around $44.00 per troy ounce during the European hours on Thursday. The non-interest-bearing Silver maintains its position near a 14-year high of $44.47, which was reached on Tuesday as traders widely expect a 25-basis-point rate cut by the US Federal Reserve (Fed) at its October policy meeting.
US Federal Reserve (Fed) Chair Jerome Powell struck a cautious note, stressing that the US central bank must weigh stubborn inflation against a softening job market, calling it “a challenging situation” and reiterating comments from last week. However, the CME FedWatch tool suggests that money markets are currently pricing in nearly a 92% possibility of a Fed rate cut in October, up from 87% a week earlier.
Traders would likely observe the upcoming US Q2 Gross Domestic Product Annualized later in the day. Focus will shift toward Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve’s preferred inflation gauge, due later on Friday.
Safe-haven Silver draws support due to rising geopolitical tensions, with NATO warning Russia it would use “all necessary military and non-military measures” to defend itself, while President Trump said Ukraine could reclaim all territory held by Russia. Ukrainian President Volodymyr Zelenskiy, in a UN speech on Wednesday, urged world powers to end Russia’s war, warning it fuels a dangerous arms race, per Reuters.
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.
