Silver Price Forecast: XAG/USD moves below $29.00 near three-month lows

Silver hovers near a three-month low at $28.74, which was recorded in the previous session.
A non-yielding Silver struggles as central banks emphasize the need for caution regarding additional rate cuts.
The demand concerns for Silver metal increase due to potential tariffs from the upcoming Trump administration.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) continues its losing streak that began on December 12, trading around $28.90 per troy ounce during the Asian session on Friday. The price of the grey metal reached a fresh three-month low at $28.74 in the previous session.

The non-yielding assets like Silver receive downward pressure as central banks emphasize the need for caution regarding additional rate cuts. Fed Chair Jerome Powell emphasized the need for caution regarding additional rate cuts, noting that inflation is likely to remain persistently above the central bank's 2% target.

Moreover, the Bank of Japan (BoJ) maintained its ultra-low interest rates on Thursday as President-elect Donald Trump’s tariff threats loomed over Japan's export-driven economy. Meanwhile, the Bank of England (BoE) kept interest rates unchanged, with policymakers divided on the appropriate response to the country’s slowing economic growth. On Friday, the People’s Bank of China (PBoC) decided to keep its Loan Prime Rates (LPRs) unchanged.

Concerns about potential tariffs from the upcoming Trump administration have heightened worries about weak demand for Silver as an industrial input, causing the metal to underperform in the fourth quarter. Additionally, Silver prices face challenges due to the constrained industrial outlook, driven by overcapacity in China’s solar panel industry, which has led photovoltaic companies to join a government self-discipline program to regulate supply.

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.

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