Silver Price Forecast: XAG/USD remains steady near $32.50, three-month highs

Silver price holds ground near its three-month high of $32.56, recorded on February 5.
The upside of the Silver appears limited as the US Dollar gains ground amid rebounding US Treasury yields.
Traders await US Nonfarm Payrolls to gain fresh clues regarding the Fed’s monetary policy direction.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) remains in positive territory for the fifth consecutive session, trading around $32.30 per troy ounce during Asian hours on Friday. The precious metal maintains its position near its three-month high of $32.56, recorded on February 5. Traders are awaiting key US labor market data, including Nonfarm Payrolls (NFP), which could influence the Federal Reserve’s (Fed) monetary policy direction.

However, Silver's upside appears limited as the US Dollar (USD) extends its recovery amid rebounding US Treasury yields. The US Dollar Index (DXY), which tracks the USD against six major currencies, has climbed near 107.70, while 2-year and 10-year US Treasury yields stand at 4.22% and 4.43%, respectively, at the time of writing.

Safe-haven metals like Silver have gained ground amid heightened risk aversion due to global trade and economic uncertainties. However, trade negotiations between the United States (US) and China could temper this sentiment. US President Donald Trump and Chinese President Xi Jinping are set to discuss potential tariff rollbacks, which could ease market concerns and limit Silver’s upside.

Diminished fears of a US-China trade war also reduce the risk of rising US inflation, reinforcing expectations of two Federal Reserve rate cuts this year. As a non-yielding asset, Silver benefits from a dovish stance by major central banks.

Meanwhile, the Reserve Bank of India (RBI) is expected to announce a 25-basis-point rate cut on Friday. Last week, the European Central Bank (ECB) lowered its Deposit Facility Rate by 25 basis points to 2.75%, while the People’s Bank of China (PBoC) has signaled potential rate cuts. Additionally, the Bank of Canada (BoC) has paused its quantitative tightening, and Sweden’s Riksbank has cut interest rates.

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

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.

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