Silver Price Forecast: XAG/USD rebounds toward $38.50 ahead of US inflation data
- Silver price advances as traders adopt caution ahead of US Consumer Price Index data.
- Fed Chair Powell indicated that inflation may increase over the summer due to tariff-related pressures.
- The safe-haven demand for Silver increases as Trump has warned to impose “very severe” tariffs on Russia.
Silver price (XAG/USD) recovers its recent losses from the previous session, rebounds toward a 14-year high of $39.13, which was reached on Monday, and is trading around $38.40 per troy ounce during the European hours on Tuesday. Silver price gains ground as traders adopt caution ahead of June's US Consumer Price Index (CPI) data, which may offer fresh impetus over the Federal Reserve’s (Fed) monetary outlook.
The Silver attracted sellers as Federal Reserve (Fed) Chair Jerome Powell indicated that inflation is expected to rise over the summer, driven by tariff-related pressures. This has increased the likelihood of the Fed delaying interest rate cuts until later this year. Meanwhile, concerns over the Fed’s independence resurfaced as President Trump renewed his criticism of Powell, insisting that interest rates should be at 1% or lower.
Moreover, the global trade concerns eased as Trump expressed willingness to engage in further tariff negotiations with the European Union (EU) and other key partners. However, traders would likely adopt caution following the US government’s decision, on Monday, to immediately impose a 17% duty on most imports of fresh tomatoes from Mexico after negotiations ended without an agreement to avert the tariff.
However, the safe-haven demand for Silver increases due to renewed geopolitical tensions following the US President Donald Trump’s latest threat to impose “very severe” tariffs on Russia if no peace deal is reached within 50 days.
President Trump, alongside NATO Secretary-General Mark Rutte, also confirmed that European allies will purchase billions of dollars’ worth of American-made weapons. These weapons include Patriot missile systems, which will be transferred to Ukraine in the coming weeks to tackle intensified Russian attacks.
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.
