Silver Price Forecast: XAG/USD nosedives below $80 as US bond yields surge significantly
- Silver price slides vertically to near $77.57 during the day amid soaring US Treasury yields.
- The Fed is unlikely to cut interest rates this year.
- Improving US-China trade relations and squeezed dovish Fed bets have strengthened the US Dollar.
Silver price (XAG/USD) is down over 5% to near $79.00 during the European trading session on Friday, and touched an intraday low of $77.57 earlier in the day. The white metal faces intense selling pressure due to surging United States (US) bond yields amid firm expectations that the Federal Reserve (Fed) will either hold interest rates steady or raise them this year.
During the press time, 10-year US Treasury yields are up 1.66% at 4.53%, the highest level seen in almost a year. Higher yields on interest-bearing assets diminish the appeal of non-yielding assets, such as Silver.
According to the CME FedWatch tool, the odds of the Fed keeping interest rates in the current range of 3.50%-375% and delivering at least one interest rate hike are 52.3% and 47.4%, respectively.
Traders have priced out dovish Fed bets due to a significant increase in the US inflationary pressures amid elevated energy prices in the wake of the US-Iran conflicts. Before the US Consumer Price Index (CPI) data release for April on Tuesday, the possibility of the Fed raising borrowing rates at least once this year was 23.5%.
Meanwhile, a higher US Dollar (USD) due to a significant jump in US bond yields and improving trade relations between the US and China is also hurting the Silver price. During the day, the US Dollar Index (DXY) posted a fresh over two-week high at 99.20. Technically, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
Silver technical analysis
XAG/USD trades sharply lower at around $79.00 at the press time. The white metal extends correction to near the 20-day exponential moving average (EMA) at $79.26, leaving the near-term tone broadly neutral after the pullback from recent highs.
The Relative Strength Index (RSI) at 50.54 hovers around the midline, hinting at a loss of directional conviction rather than a clear bearish or bullish impulse.
On the downside, the first notable support is the rising trend-line zone around $75.83, where a break lower would expose a deeper corrective phase towards $70.00. On the topside, the May 13 high at around $89.38 will remain a key barrier.
(The technical analysis of this story was written with the help of an AI tool.)
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
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.
