Silver Price Forecast: XAG/USD surges to near $58.20 as oil price rally hits pause
- Silver price soars to near $58.20 as rally in oil prices hits a pause.
- Iran receives a proposal for a 10-day cessation of strikes with the US.
- The Fed is expected to leave interest rates unchanged next week.
Silver price (XAG/USD) is up over 3% to near $58.20 during the early European trading session on Tuesday. The white metal surges as the rally in oil prices has halted amid hopes of renewed diplomatic efforts between the United States (US) and Iran after significant military aggression in the past few weeks.
At press time, the WTI Oil price trades 0.45% lower to near $81.90. On Monday, the WTI Oil price corrected after posting a fresh monthly high at $84.42.
Since the onset of the Middle East war, higher oil prices due to energy supply disruption de-anchored global inflation expectations, which intensified fears of interest rate hikes from various central banks. This scenario boded poorly for non-yielding assets, such as Silver.
Fresh hopes of US-Iran war de-escalation emerged after a spokesperson from Tehran confirmed receiving a proposal of 10-day cessation of strikes with the US from mediators to find ways to revive the interim deal, which fuelled investors’ confidence that negotiations between nations is still on.
On the US interest rate front, the Federal Reserve (Fed) is highly anticipated to leave interest rates unchanged in the policy meeting next week, according to the CME FedWatch tool.
Silver technical analysis
XAG/USD trades higher at around $58.12, but is maintaining a bearish near-term bias as it holds below the 20-period exponential moving average (EMA) at $59.65. The price action sits under this short-term trend gauge, suggesting rallies remain capped for now, while the Relative Strength Index (14) at 41.94 has recovered from oversold readings but still points to only moderate, corrective upside pressure rather than a sustained bullish move.
On the topside, initial resistance is located at the 20-day EMA at $59.65, and a decisive break above this barrier would be needed to ease the current downside pressure and open the door to a more meaningful recovery. On the downside, the July 17 low at $54.77 is the key support level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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
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.
