Silver Price Forecast: XAG/USD rises to near $38.80 as Fed Cook’s removal dampens market mood
- Silver price attracts slight bids as the ousting of Fed Governor Cook has increased safe-haven demand.
- Trump accused Fed’s Cook for providing false statements in one or more mortgage agreements.
- The Fed is expected to cut interest rates in the September meeting.
Silver price (XAG/USD) recovers its early losses and trades 0.33% higher to near $38.80 during the European trading session on Tuesday. The white metal gains as the market sentiment turns slightly risk-averse, following the removal of Federal Reserve (Fed) Governor Lisa Cook by United States (US) President Doanld Trump over mortgage allegations.
S&P 500 futures are down 0.15% during European trading hours. US equities have declined further after a weak session on Monday, indicating a cautious market mood. The demand for safe-haven assets, such as Silver, increases in a risk-off market environment.
US President Trump announced Fed Cook’s removal by posting her termination letter on Truth.Social in which he stated that Cook has been removed from her designation, with immediate effect, for making false statements on one or more mortgage agreements.
However, Cook said that she will continue to carry out her duties as Fed Governor. In a statement shared by her attorneys, “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so.”
The event has been seen as a major threat to Fed’s independence, which has undermined the credibility of the US administration.
Broadly, firm expectations that the Fed will cut interest rates in the September policy meeting are continued to support the Silver price. Lower interest rates by the Fed bode well for non-yielding assets, such as Silver.
Silver technical analysis
Silver price trades slightly higher around $38.80 on Tuesday. The near-term trend of the white metal remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which trades around $38.10.
The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating indecisiveness among market participants.
Looking down, the June 24 low of $35.28 will act as key support for the major. On the upside, the July 23 high near $39.53 will be a critical hurdle for the pair.
Silver daily chart
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
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.
