Silver Price Forecast: XAG/USD moves above $47.50 as safe-haven demand increases
- Silver price appreciates as risk aversion increases on a global selloff in risk assets.
- The non-yielding Silver struggled as expectations for a US Federal Reserve rate cut in December diminished.
- The safe-haven metal may further lose ground as China plans to lift some tariffs on US agricultural goods.
Silver price (XAG/USD) halts its three-day losing streak, trading around $47.60 per troy ounce during the Asian hours on Wednesday. The price of Silver metal gains ground amid increased safe-haven demand, driven by a global selloff in risk assets.
Global stocks and other risk assets came under pressure as concerns mounted over inflated AI valuations. Risk aversion intensified following warnings from major Wall Street bank CEOs about possible market corrections.
The non-interest-bearing Silver faced challenges amid decreasing odds of the US Federal Reserve (Fed) rate cut in December. Fed funds futures traders are now pricing in a 69% chance of a cut in December, down from 90% a week ago, according to the CME FedWatch Tool.
Fed Chair Jerome Powell said last week during the post-meeting press conference that another rate cut in December is far from certain. Powell also cautioned that policymakers may need to take a wait-and-see approach until official data reporting resumes.
The safe-haven demand for Silver may weaken amid improving market sentiment, driven by the improving United States (US)-China trade situation. China’s Finance Ministry announced that it will lift some tariffs on US agricultural products starting November 10. The ministry also said that the 24% tariffs on certain US goods will be suspended for one year, while the 10% tariffs will remain in place.
On Tuesday, the White House announced that China will suspend extra export controls on rare earths and end probes into US semiconductor firms, in exchange for the US pausing some tariffs and canceling a planned 100% levy on Chinese exports.
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.
