Silver Price Forecast: XAG/USD jumps to near $80.50 ahead of US NFP data

Silver price climbs to near $80.50 in countdown to the US NFP data.
The US NFP will likely show the addition of 62K fresh workers in April.
US President Trump confirms that the ceasefire with Iran remains intact.

Sagar Dua FXStreet

Silver price (XAG/USD) is up 2.6% to near $80.50 during the early European trading session on Friday. The white metal reflects sheer strength as United States (US) President Donald Trump has confirmed that the ceasefire with Iran is still intact despite the exchange of attacks near the Strait of Hormuz on Thursday.

Theoretically, renewed geopolitical tensions improve the appeal of safe-haven assets, such as Silver; however, US-Iran conflicts are supporting oil prices, which in turn boost inflation expectations and discourage global central banks from lowering interest rates. The scenario of central banks maintaining a “hold or hawkish” stance on the monetary policy bodes poorly for non-yielding assets, such as Silver.

On Thursday, US President Trump said in an interview with ABC News, “The ceasefire is going. It's in effect," when asked if the exchange meant the ceasefire, which began a month ago, was over.

Before that, Iran accused Washington of violating the ceasefire after US naval destroyers attacked Iranian oil tankers. In response, US President Trump clarified that those strikes were a retaliatory measure against attacks by Iran.

Meanwhile, investors await the US Nonfarm Payrolls (NFP) data for April, which will be published at 12:30 GMT. The US NFP report is expected to show that the economy created 62K fresh jobs, significantly lower than 178K in March. The Unemployment Rate is seen as steady at 4.3%.

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

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