Silver Price Forecast: XAG/USD steadies around $33.50 due to weaker safe-haven demand

Silver price stays silent as safe-haven demand dampens after Trump extended the 50% tariff deadline on EU imports.
The safe-haven Silver may regain its ground amid rising concerns over the US economy.
Silver attracted buyers after Moody’s downgraded the US credit rating from Aaa to Aa1.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) remains steady after registering more than 1% gains in the previous session, trading around $33.40 per troy ounce during the European hours on Monday. Safe-haven demand for precious metals, including Silver, weakened due to easing trade war between the United States (US) and the European Union (EU).

The risk sentiment improves US President Donald Trump extended the tariff deadline on the European Union (EU) from June 1 to July 9. Trump stepped back after threatening to impose a 50% tariff on imports from the European Union.

However, the downside of the Silver price could be limited as the safe-haven demand would strengthen amid growing uncertainty surrounding the US economy. US fiscal deficit could increase further when Trump's “One Big Beautiful Bill” passes on Senate floor.

On Sunday, US Senator Ron Johnson said in an interview on CNN, "I think we have enough votes to stop the process until the President gets serious about spending reduction and reducing the deficit.” “My primary focus now is spending. This is completely unacceptable. Current projections are a $2.2 trillion per year deficit,” Johnson added.

Moreover, Silver attracted buyers after Moody’s downgraded the US credit rating from Aaa to Aa1. Moody’s now projects US federal debt to climb to around 134% of GDP by 2035, up from 98% in 2023, with the budget deficit expected to widen to nearly 9% of GDP.

Chicago Federal Reserve (Fed) President Austan Goolsbee noted on Friday that adjustments in the Fed’s interest rates are likely to be delayed due to Trump’s latest tariff threats. Meanwhile, Kansas City Fed President Jeffrey Schmid said that policymakers will gauge hard data before deciding on interest rate decisions, and the Fed needs to be careful how much emphasis it puts on soft data.

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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