Silver Price Forecast: XAG/USD rises as oil prices correct, US Dollar faces pressure

Silver price gains to near $60.22 amid signs of US-Iran war de-escalation.
A US official has confirmed that technical talks between the US and Iran are still on.
Investors await the US CPI data, which will be released next week.

Sagar Dua FXStreet

Silver price (XAG/USD) trades 0.4% higher to near $60.22 during the European trading session on Friday. The white metal gains as the US Dollar (USD) continues to remain under pressure amid hopes that the restart of the war between the United States (US) and Iran won’t long last.

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.17% lower to near 100.76. The DXY fell further during the day to near its three-week low at around 100.60.

Technically, a lower US Dollar makes the Silver price a favorable risk-reward bet for investors.

Earlier in the day, a US official confirmed that technical talks with Iran remained continued, despite President Donald Trump declaring that the memorandum of understanding (MoU) with Tehran is over.

Late Wednesday, US President Trump said that he had a conversation with Iran, adding that the nation wants the deal badly. However, he doesn’t believe that Iran would honor the deal.

Meanwhile, a steep correction in oil prices after significant gains earlier this week has also supported the Silver price. The WTI Crude Oil price holds onto Thursday’s losses near $72.00.

Going forward, investors will focus on the US Consumer Price Index (CPI) data for June, which will be released next week.

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

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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