Silver Price Forecast: XAG/USD slumps to near $38.00 as US-China tariff deadline looms
- Silver price loses momentum to around $38.10 in Monday’s Asian session.
- Traders brace for further developments surrounding the US-China trade truce ahead of a deadline.
- Rising Fed rate cut bets might help limit Silver’s losses.
The Silver price (XAG/USD) faces some selling pressure near $38.10, snapping the six-day winning streak during the Asian trading hours on Monday. A firmer US Dollar (USD), profit-taking and optimism surrounding the trade truce between the United States (US) and China undermine safe-haven assets like Silver.
Traders focus on developments in trade talks between the world’s two largest economies ahead of a deadline to avoid the imposition of higher tariffs. US Commerce Secretary Howard Lutnick said on Thursday that it's likely that US President Donald Trump would extend the trade deadline by another 90 days.
Additionally, US Trade Representative Jamieson Greer stated that the US and China were “working towards” an extension. The positive developments could weigh on the white metal. However, any signs of trade tensions could lift the Silver as traders seek safe-haven assets in an increasingly volatile global landscape.
Markets will also keep an eye on US inflation data later on Tuesday, which might offer some insight into the Federal Reserve’s (Fed) interest rate outlook. Any signs of softer US inflation could boost the chance of more interest rate cuts than previously expected by the Fed and lift the Silver price. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding white metal.
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
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
