Silver Price Forecast: XAG/USD rises toward $57.00 despite Fed hike bets
- Silver faces headwinds as US-Iran clashes boost oil prices, fueling inflation and rate-hike fears.
- Nightly US strikes on Iran prompted Tehran to declare its ceasefire dead, threatening major energy disruptions along key waterways.
- Cleveland Fed President Beth Hammack warned on Friday that inflation remains persistent.
Silver price (XAG/USD) gains ground for the second successive day, trading around $56.80 per troy ounce during the Asian hours on Monday. However, the non-interest-bearing white metal could face tough sledding ahead as United States (US)-Iran clashes drive oil prices higher, and resurfacing inflation risks are fueling expectations for Fed rate hikes.
The US has launched its ninth consecutive night of strikes against Iranian targets. In response, Iranian officials declared that the ceasefire between the two nations has been effectively abandoned, opening the door for deepening disruptions to crucial energy pathways through the region's narrow waterways.
The conflict has rapidly intensified across the region, triggering air raid sirens in Bahrain after Iran launched a fresh wave of ballistic missiles and one-way attack drones targeting sites across Bahrain, Jordan, Kuwait, and Iraq. Meanwhile, the US military reported the death of a third service member within the span of two days amid the ongoing exchanges.
The violence has also expanded beyond strictly military targets to hit critical infrastructure, with bridges, utilities, and port facilities coming under fire. Over the weekend, Kuwait Petroleum Corp. confirmed that an Iranian strike struck one of its oil facilities on Saturday.
While the central bank is widely expected to hold interest rates steady at its upcoming meeting, market pricing via the CME FedWatch Tool now reflects a 61.4% probability of a rate hike in September.
Hammack flags broad-based inflation pressures, reinforcing hawkish Fed tone
Fed’s Hammack delivers a notably more hawkish message, with a 7.2/10 FXS Speechtracker score standing above the 6.6/10 historical average and underscoring heightened concern about persistent price pressures. The emphasis on businesses calling for action to curb inflation and consumers “who can’t make ends meet” despite solid growth and stable spending highlights a tension between resilient activity and mounting social strain, while references to energy, supply chains, insurance, and AI data centers point to a broad-based and structurally complex inflation mix. By framing “persistently high inflation” as the bigger concern, the speech tilts expectations toward a tighter-for-longer policy stance, supportive of the Dollar on the margin.
The FXS Fed Sentiment Index rose by 2.06 points to 128.64, reinforcing that the broader Fed communication backdrop remains firmly in hawkish territory well above the 100 neutral line. In combination with the above-baseline FXS Speechtracker score for Hammack, this move signals that recent Fed rhetoric continues to lean toward prioritizing inflation control over growth risks, a configuration that typically underpins the Dollar against lower-yielding peers.
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
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.
