Silver Price Forecast: XAG/USD reaches fresh 14-year highs near $39.00
- Silver price has marked $39.10, the highest since September 2011, on Monday.
- The safe-haven Silver attracts buyer following President Trump’s 30% tariff on imports from the European Union and Mexico.
- Traders adopt caution after US economic adviser Kevin Hassett suggested that Trump could remove Fed’s Powell “if there’s cause.”
Silver price (XAG/USD) extends its three-day winning streak, marking fresh highs since September 2011 and trading around $39.00 per troy ounce during the European hours on Monday. The price of the safe-haven metal rises amid dampening market sentiment, driven by the new tariff concerns.
US President Donald Trump announced, on Saturday, a 30% tariff on imports from the European Union (EU) and Mexico starting August 1. Trump also proposed a blanket tariff rate of 15%-20% on other trading partners, an increase from the current 10% baseline rate.
However, the European Union announced on Sunday that it will extend its pause on retaliatory measures against US tariffs until early August, in hopes of reaching a negotiated agreement. Reports also indicated that the EU has initiated discussions with other countries hit by the tariffs, including Canada and Japan, to explore coordinated responses.
Silver prices gains ground as traders adopt caution ahead of key US inflation data this week, which could offer fresh impetus on the broader economic impact of the new tariffs. Additionally, market sentiment turned cautious following remarks from US economic adviser Kevin Hassett, who suggested that Trump could remove Federal Reserve (Fed) Chair Jerome Powell "if there's cause." Traders are now anticipating a little more than 50 basis points of Fed rate cuts by the end of the year.
However, the upside of the Silver price could be restrained as Chinese Trade Surplus narrowed in June. The country’s Trade Balance arrived at CNY585.96 billion for June, down from CNY 743.56 billion previously. This is important to note that Silver plays a crucial role in industrial applications such as electronics, solar panels, and automotive components. As one of the world’s largest manufacturing hubs, China’s industrial demand for Silver is substantial.
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.
