Silver Price Forecast: XAG/USD rises toward $81.00 despite cautious Fed's outlook

Silver may face pressure due to high energy costs and tightening central banks' outlook.
April’s 115K US Nonfarm Payrolls beat expectations and steady 4.3% unemployment rate justifies the Fed's restrictive monetary policy.
President Trump rejected Iran’s latest peace proposal, calling it “totally unacceptable.”

Akhtar Faruqui FXStreet

Silver price (XAG/USD) extends its winning streak for the fourth successive day, trading around $80.70 per troy ounce during the Asian hours on Monday. However, Silver prices may face significant downward pressure as a "perfect storm" of rising energy costs and cautious central bank signals dampens investor appetite for non-interest-bearing assets.

With energy prices fueling fresh inflation concerns, global markets are increasingly pricing in a "higher-for-longer" interest rate environment. This sentiment was further bolstered by the latest US labor market data; although Nonfarm Payrolls slowed to 115K in April from March's 185K, the figure vastly outperformed the 62K expected by analysts. With the unemployment rate holding steady at 4.3%, the Federal Reserve has ample justification to maintain a restrictive monetary policy. Traders are now pricing in a 25-basis-point rate hike from the European Central Bank (ECB) in June, with expectations for a total of three hikes by the end of 2026.

The geopolitical landscape has added another layer of volatility as hopes for a diplomatic breakthrough in the Middle East begin to sour. US President Donald Trump recently dismissed Iran’s latest peace proposal, labeling it “totally unacceptable.” While Tehran has expressed a desire to end the conflict across all fronts, including Lebanon, and secure critical shipping routes through the Strait of Hormuz, the lack of a concrete timeline for reopening the waterway has left markets on edge. These stalled negotiations, coupled with renewed weekend attacks, have threatened the fragile ceasefire that had been in place since early April.

Compounding Silver's struggle is the resurgent strength of the US Dollar (USD), which has emerged as the primary beneficiary of recent safe-haven demand. As investors pivot toward the liquidity of the greenback to hedge against geopolitical instability, dollar-denominated metals become more expensive for international buyers.

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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