Silver Price Forecast: XAG/USD struggles to extend opening gains amid hawkish Fed bets

Silver price faces pressure in extending the opening advance above $58.70.
Oil prices decline significantly on US-Iran ceasefire 2.0.
The Fed is expected to hike interest rates in the September policy meeting.

Sagar Dua FXStreet

Silver price (XAG/USD) opens strongly due to a sharp decline in oil prices, but struggles to extend gains beyond $58.68 during the day. At press time, the Silver price is up 1% to near $58.20.

The white metal has started the week on a firm footing as lower oil prices due to the announcement of a ceasefire 2.0 between the United States (US) and Iran have anchored global inflation expectations.

Over the weekend, US President Donald Trump announced, through a post on Truth Social, that planned attacks on Iran have been suspended as Tehran has agreed to the nuclear deal and the reopening of the Strait of Hormuz, a vital passage to almost 20% of global energy supply.

The Silver price has underperformed significantly in the past few months as oil prices fuelled global inflation projections, a scenario that forces central banks to tighten monetary conditions. Such a case bodes poorly for non-yielding assets, like Silver.

It is highly likely that the hawkish Federal Reserve (Fed) will restrict Silver’s upside. Analysts at Deutsche Bank expect two further 25bps increases this year. According to the CME FedWatch tool, the odds of the Fed hiking interest rates next month are 64.5%.

Silver technical analysis

Bias: XAG/USD trades higher at around $58.20, but is keeping a bearish near-term tone as it holds beneath the 20-day Exponential Moving Average (EMA) at $58.79.

Momentum: The price's failure to reclaim this short-term EMA suggests rallies remain capped for now, while the Relative Strength Index (RSI) at 46 stays in neutral territory on the daily chart, hinting at modest downside pressure rather than a decisive trend move.

Resistance: On the topside, initial resistance is located at the 20-day EMA at $58.79, and a sustained break above this barrier would be needed to ease the current bearish bias and open the way for $60.00.

Support: Looking down, the July 17 low at $54.77 is the key support zone.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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