Silver Price Forecast: XAG/USD moves above $34.00 due to rising geopolitical tensions

Silver price receives support from safe-haven flows amid rising Middle-East tensions.
Israel targeted the offices of Hezbollah's al-Qard al-Hassan financial institution in southern Beirut.
The non-yielding Silver gains ground due to easing monetary policies from major central banks.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) extends its winning streak for the fifth consecutive day, trading around $34.10 during the Asian session on Monday. This upward trend is driven by safe-haven demand amidst escalating geopolitical tensions in the Middle East.

Lebanese media report that Israel has launched a new series of airstrikes on southern Beirut, targeting the offices of Hezbollah's al-Qard al-Hassan financial institution. Furthermore, the US government has initiated an investigation into the unauthorized release of classified documents that outline Israel's military preparations for a potential strike on Iran.

Furthermore, easing monetary policies from major central banks are bolstering non-yielding Silver prices. On Monday, the People's Bank of China (PBoC) reduced the 1-year Loan Prime Rate (LPR) from 3.35% to 3.10% and the 5-year LPR from 3.85% to 3.60%. Last week, the European Central Bank (ECB) also opted to cut its interest rates by 25 basis points.

The Bank of Canada (BoC) is widely anticipated to implement a significant interest rate cut of 50 basis points at its upcoming monetary policy meeting on Wednesday. Recent inflation data suggests that both the Bank of England (BoE) and the Reserve Bank of New Zealand (RBNZ) may consider potential rate cuts next month. Additionally, the US Federal Reserve (Fed) is expected to lower interest rates by 50 basis points by the end of 2024.

Regarding the US elections, markets appear optimistic about Republican nominee Donald Trump winning the 2024 presidential election. Trump's fiscal and trade policies are viewed as inflationary and favorable for the US Dollar (USD), which could negatively impact Silver demand. A stronger US Dollar makes Silver more expensive for buyers using foreign currencies, potentially dampening their purchasing power.

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

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.

GBP/USD advaces beyond 1.3450 after BoE decision, US Q2 GDP

GBP/USD gains positive momentum on Thursday, surpassing 1.3450 and trading at fresh multi-week highs. The Bank of England decided to maintain the benchmark rate unchanged at 3.75%. The MPC voted 6-3 to keep rates on hold, with the 3 dissenters favoring a rate hike. US Q2 GDP missing expectations helped the pair advance, while renewed US Dollar weakness across the FX board pushed the pair further up ahead of the monthly close.

EUR/USD confortable around 1.1530, highest in six weeks

The EUR/USD pair trades around 1.1530 in the American session on Thursday, reaching fresh six-week highs. The US Dollar is in sell-off mode, with multiple factors weighing on the American currency. Not only did the Federal Reserve vote divided to keep rates on hold on Wednesday, creating doubts about a September hike, but US Q2 GDP missed expectations. A suspected JPY intervention adds pressure on the Greenback.

Gold recovers the $4,100 level as US Dollar weakens further

Gold trades just above $4,100 amid a US Dollar sell-off. The Greenback enjoyed some near-term demand following Wednesday's post-FOMC downfall, but was unable to retain its gains. The preliminary estimate of the US Q2 GDP showed the economy grew at an annual rate of 1.5%, missing the market's expectations of 2.1%.

Bank of Japan set to keep interest rates unchanged after suspected Yen intervention

Investors are turning their attention to the Bank of Japan’s monetary policy announcement on Friday, after the Japanese Yen staged a dramatic rebound during Thursday's American session. The move came amid growing speculation that Japanese authorities intervened in the foreign exchange market after USD/JPY tumbled from above 163.00 to below 158.00 within minutes.

Aave to sunset Sonic, Aptos, zkSync, Scroll reserves, affecting $98 million in supply

Aave is planning to sunset 75 low-activity reserves across its decentralized finance protocol as part of a broader effort to reduce operational, technical and economic risks across its network of deployments.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.