Silver Price Forecast: XAG/USD rises to near $57.50 on dovish Fed expectations
- Silver price recovers as the Fed is expected to cut interest rates next week.
- Dovish Fed bets have been prompted by downside US employment risks.
- Fed’s Powell stated in the October policy meeting that the December rate cut is far from a foregone conclusion.
Silver price (XAG/USD) trades 0.5% higher to near $57.50 during the Asian trading session on Friday. The white metal rises after regaining ground, following a correction move to near $56.50 from the all-time high of $58.90.
The precious metal bounces back as traders are increasingly confident that the Federal Reserve (Fed) will cut interest rates in the monetary policy meeting next week. Lower interest rates by the Fed bode well for non-yielding assets, such as Silver.
According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to 3.50%-3.75% in the December policy meeting is 87%.
Upbeat Fed interest rate cut speculation is contrary to what Chairman Jerome Powell stated in October’s monetary policy press conference. “An interest rate cut in the December meeting is far from a foregone conclusion,” Powell said.
Weak United States (US) job market conditions have seldom contributed to firm Fed dovish expectations. The US ADP reported on Thursday that the private sector shed 32K jobs in November, while it was expected to add 5K fresh workers.
Meanwhile, several Federal Open Market Committee (FOMC) officials have supported the need to loosen the monetary policy further, citing downside labor market risks.
Silver technical analysis
XAG/USD trades higher at $57.51 during Friday's Asian trading hours. The 20-day Exponential Moving Average (EMA) climbs to $53.91, underscoring a firm uptrend with price comfortably above trend support. The 20-DAY ema has steepened in recent sessions, reinforcing bullish control.
The 14-day Relative Strength Index (RSI) at 68.48 is elevated, signaling strong momentum near overbought territory.
The bias stays upward while the 20-day EMA rises and continues to underpin pullbacks. RSI remains strong and just below the 70 mark, which could prompt a brief consolidation before the next leg higher. A sustained close above $57.51 would keep topside pressure intact, while dips holding above the average would preserve the advance.
(The technical analysis of this story was written with the help of an AI tool)
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.
