Silver Price Forecast: XAG/USD slips below $50.50 as US attacks on Iran’s Qeshm Island
- Silver may fall toward an 11-month low of $48.87 following covert US military strikes on Iran's Qeshm Island.
- Middle East tensions and high energy prices sustain inflation fears, leaving December Fed rate hike odds at 73%.
- Tech equity liquidations and US midterm election uncertainty add further downward pressure on precious metals.
Silver price (XAG/USD) depreciates after registering modest gains in the previous day, trading around $50.30 per troy ounce during Asian hours on Tuesday. Silver prices remain pinned near an 11-month low of $48.87 per ounce, a level hit on October 30, as mounting oil supply fears grip the market following a United States (US) attack on Iran’s Qeshm Island.
According to a Wall Street Journal report citing US officials, the raid on Monday is part of a covert sequence of limited strikes launched by Washington against Iranian targets in recent weeks. The military actions come shortly after US President Donald Trump downplayed expectations of a full-scale return to war with Iran following Tuesday’s midterm elections.
Meanwhile, Iranian state media outlet Press TV reported that Iran’s Islamic Revolutionary Guard Corps (IRGC) intercepted and downed two US MQM-170 drones south of Qeshm Island in the Strait of Hormuz, alongside destroying a 55th US MQ-9 drone east of the strategic waterway.
Precious metals, including Silver, have endured sustained selling pressure throughout the year as ongoing Middle East hostilities drove up energy costs and amplified inflationary risks. In response, central banks have maintained a hawkish monetary policy stance, with the CME FedWatch Tool currently pricing in approximately a 73% chance of a US Federal Reserve rate hike in December.
A broader global sell-off in technology and artificial intelligence equities triggered widespread asset liquidations across global markets. Simultaneously, market participants are monitoring the US midterm elections, where the Trump administration and the Republican Party face growing political scrutiny over elevated energy prices and inflation concerns.
Markets eye US midterms as Democrats gain momentum
Strategists at Brown Brothers Harriman note that attention is turning to the US midterm elections on Tuesday, with political handicapping increasingly favoring the Democratic Party. They point out that “Democrats are widely expected to win the House of Representatives,” while “Senate control is much closer, but the tide favors the Democratic Party,” underscoring expectations for a potential shift in the balance of power in Congress.
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.
