Silver Price Forecast: XAG/USD rallies on strong US jobs report, weaker Dollar

Silver jumps as markets digest stronger-than-expected US job creation figures and a weaker US Dollar.
Tensions around the Strait of Hormuz continue to support demand for safe-haven assets.
Markets still expect Federal Reserve rate cuts despite a stronger-than-expected NFP report.

Ghiles Guezout FXStreet

Silver (XAG/USD) trades around $80.70 on Friday at the time of writing, up 2.98% on the day, supported by a weaker US Dollar (USD) and persistent demand for safe-haven assets amid heightened geopolitical tensions.

The United States (US) Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) increased by 115K in April, beating market expectations of 62K. March’s figure was also revised higher to 185K from 178K previously reported. The Unemployment Rate remained steady at 4.3%, while annual wage growth accelerated to 3.6%, although it came in below expectations of 3.8%.

Despite the stronger-than-expected labor market data, the US Dollar weakens as markets focus on optimism surrounding a potential agreement between Washington and Tehran and improving risk sentiment across Equity markets.

At the same time, investors remain focused on developments in the Middle East after reports of new military strikes near the Strait of Hormuz. According to US and Iranian media outlets, explosions were heard in the region as exchanges of fire between the US and Iran continue to fuel fears of a broader escalation.

This backdrop continues to support precious metals, with Silver benefiting both from its safe-haven appeal and from the weakness of the US Dollar, which increases the attractiveness of USD-denominated commodities for international buyers.

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

Ghiles Guezout

FXStreet

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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