Silver Price Forecast: XAG/USD rises above $44.00 due to dovish Fedspeak

Silver price attracts buyers following dovish remarks from the Fed officials.
San Francisco Fed President Daly said more rate cuts may be needed to restore price stability and support jobs.
The CME FedWatch tool suggests nearly a 92% possibility of a Fed rate cut in October.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) maintains its position following intraday gains, trading around $44.00 per troy ounce during the European hours on Thursday. Silver prices hold ground near a 14-year high of $44.47, which was reached on Tuesday as traders put their bets on the precious metal due to dovish remarks from the US Federal Reserve (Fed) officials.

San Francisco Fed President Mary Daly said on Wednesday that further rate reductions are likely to be needed, as the central bank works to restore price stability and provide necessary support to the labor market. Chicago Fed President Austan Goolsbee broke away from the overarching narrative of consecutive Fed rate cuts heading through the end of the year, widening the narrative gap between Fed incumbents and Donald Trump's newly minted Fed pick, Stephen Miran.

Traders will also likely observe the upcoming speeches from Kansas City Fed President Jeff Schmid, New York Fed President John Williams, Fed Governor Michael Barr, and Dallas Fed President Lorie Logan due on Thursday. The CME FedWatch tool suggests that money markets are currently pricing in nearly a 92% possibility of a Fed rate cut in October, up from 87% a week earlier.

Silver price draws support from safe-haven demand amid rising geopolitical tensions, with NATO warning Russia it would use “all necessary military and non-military measures” to defend itself, while President Trump said Ukraine could reclaim all territory held by Russia. Ukrainian President Volodymyr Zelenskiy, in a UN speech on Wednesday, urged world powers to end Russia’s war, warning it fuels a dangerous arms race, per Reuters.

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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