Silver Price Forecast: XAG/USD rebounds toward $73.50 due to safe-haven demand
- Silver prices steadied after plunging more than 7% in the previous session.
- Traders took aggressive profits after XAG/USD hit a record high of 85.87 on Monday.
- Safe-haven demand for Silver remains strong amid persistent Ukraine–Russia and Middle East tensions.
Silver price (XAG/USD) holds ground after registering a steep drop of more than 7% in the previous session, trading around $73.50 per troy ounce during the Asian hours on Tuesday. Traders engaged in aggressive profit-taking after the XAG/USD pair hit a record high of 85.87 on Monday.
Silver prices faced challenges after the CME decided to raise margin requirements on Silver futures, forcing leveraged traders to cut exposure as prices became technically overstretched. Analysts said the pullback reflected position unwinding rather than weakening underlying demand.
Despite near-term volatility, Silver continues to draw support from structural supply constraints and robust industrial demand, particularly from the solar, electronics, and data-center sectors. Silver’s rally has also been fueled by a surge in speculative demand in China, driving premiums on the Shanghai Futures Exchange to record highs. These elevated premiums point to acute local demand and have tightened global supply chains, echoing earlier inventory squeezes in London and New York vaults.
Safe-haven demand for Silver remains strong amid persistent geopolitical risks. Uncertainty has resurfaced around efforts to end the war in Ukraine following alleged strikes on President Putin’s residence. In the Middle East, Saudi air strikes in Yemen and Iran’s declaration of a “full-scale war” with the United States (US), Europe, and Israel have raised fears of broader instability, with Trump warning of further strikes if Iran resumes rebuilding its nuclear programme.
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.
