Silver Price Forecast: XAG/USD slips to near $67.00 as Middle East tensions flare
- Silver drops as fresh Middle East military friction dampens recent diplomatic optimism.
- US forces shot down two Iranian attack drones targeting commercial vessels near the Strait of Hormuz.
- President Trump signaled a weekend Iran peace deal after canceling planned US military strikes on their energy infrastructure.
Silver price (XAG/USD) depreciates after registering over 6% gains in the previous day, trading around $67.00 per troy ounce during the Asian hours on Friday. The white metal faces downward pressure following fresh military friction in the Middle East, which tempered recent diplomatic optimism.
Fox News reported that US forces intercepted and shot down two Iranian one-way attack drones near the critical Strait of Hormuz after they attempted to target commercial vessels. Conversely, Iranian state media attributed explosion sounds in Sirik to a confrontation with a vessel breaching the waterway. They claimed the Islamic Revolutionary Guard Corps (IRGC) issued a warning to an oil tanker, forcing it to comply with a regional traffic ban.
Despite the clash, prospects for a diplomatic pivot remain on the table. US President Donald Trump signaled that a comprehensive peace agreement with Iran could be finalized as early as this weekend, a significant shift following his recent decision to pause planned military strikes on Iran’s energy infrastructure. While the official text still requires formal bilateral approval, Iran’s semi-official Fars news agency indicated that Tehran is likely to accept the terms. According to President Trump, the landmark deal aims to safely reopen shipping lanes in the Strait of Hormuz and secure binding commitments from Iran to abandon its nuclear weapons program.
Meanwhile, geopolitical friction continues to ripple through global financial policies, compounding hawkish central bank pressures. On Thursday, the European Central Bank (ECB) raised interest rates for the first time since 2023, while simultaneously upgrading its inflation projections for 2026 and 2027. Domestic economic data also revealed that US producer prices jumped 6.5% year-on-year in May. This surge underscores the lingering inflationary impact of the Middle East energy shock, heavily reinforcing market expectations that the Federal Reserve (Fed) will implement an interest rate hike later this year.
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.
