Silver Price Forecast: XAG/USD slips below $75.00 due to fresh Middle East hostilities
- Silver falls as escalating Middle East hostilities reinforce expectations of higher interest rates, lowering the non-yielding metal's appeal.
- Closing the Strait of Hormuz raises energy prices and inflation, keeping Fed interest rates higher for longer.
- Iran’s failed missile strikes on Kuwait and Bahrain prompted US retaliatory attacks on Iran’s Qeshm Island.
Silver price (XAG/USD) depreciates after registering modest gains in the previous day, trading around $74.70 per troy ounce during the Asian hours on Wednesday. The non-yielding white metal loses ground following a fresh escalation of hostilities in the Middle East.
A prolonged closure of the Strait of Hormuz threatens to drive energy prices higher and intensify global inflationary pressures, reinforcing expectations that the Federal Reserve (Fed) will maintain elevated interest rates for an extended period.
This higher-for-longer outlook is heavily supported by a resilient US economy, highlighted by the ISM Manufacturing PMI climbing to 54 in May 2026, up from 52.7 in the prior two months and beating forecasts to mark the strongest factory expansion since May 2022.
Further evidence of economic strength appeared in the labor market, where April JOLTS data showed Job Openings surging to a nearly two-year high of 7.6118 million alongside declining layoffs. With robust manufacturing and employment data complicating the inflation outlook, investors are now anxiously awaiting Friday’s Nonfarm Payrolls report for definitive clues on the future trajectory of monetary policy.
Iran launched ballistic missiles toward neighboring Kuwait and Bahrain. The United States (US) military stated that the missiles failed to hit their targets, prompting American forces to conduct retaliatory strikes on Iran's Qeshm Island. Compounding the market's caution is the deep uncertainty surrounding US-Iran peace negotiations. While US President Donald Trump has maintained that discussions remain ongoing, state media reports out of Iran have cast significant doubt on the progress of the talks.
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.
