Silver Price Forecast: XAG/USD trades around $36.00 after recovering recent losses

Silver price faced challenges amid decreased safe-haven demand following the ceasefire agreement in the Middle East.
Trump announced a "complete and total" ceasefire between Israel and Iran.
Fed Vice Chair for Supervision, Governor Michelle Bowman, could support an interest rate cut in July.

Akhtar Faruqui FXStreet

Silver price (XAG/USD) pared its intraday losses, trading around $36.10 per troy ounce during the Asian hours on Tuesday. Prices of precious metals, including Silver, depreciated as a ceasefire agreement between Israel and Iran dampened the safe-haven demand.

President Trump said on Monday that a "complete and total" ceasefire between Israel and Iran will go into effect to end the conflict between the two nations. He also added that Iran will begin the truce immediately, followed by Israel after 12 hours.

Trump's comments came shortly after Iran fired missiles at the Al Udeid Air Base in Qatar on Monday. Qatar officials said that the missile barrage was intercepted and that the base had been evacuated in advance.

On Monday, Federal Reserve’s (Fed) Vice Chair for Supervision Michelle Bowman could support a rate cut in July as risks to the job market may be on the rise. Bowman also highlighted that inflation appears to be on a sustained path back to 2%, and she is less concerned that tariffs will cause an inflation problem. The non-interest-bearing Silver may attract buyers as investors look for better returns on their investments.

Moreover, Fed Governor Christopher Waller highlighted on Friday that the US central bank could start easing monetary policy as soon as next month. However, Fed Chair Jerome Powell warned that ongoing policy uncertainty will keep the Fed in a rate-hold stance, and any rate cuts will be contingent on further improvement in labor and inflation data. Investors will likely observe Fed Chair Jerome Powell, who is scheduled to testify before the US Congress on Tuesday and Wednesday, in search of clues about the future direction of interest rates.

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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