Silver Price Forecast: XAG/USD trades around $80.50 after paring recent losses
- Silver rebounds after plunging over 16% as hawkish Fed signals and easing geopolitics pressured precious metals.
- Fed’s Cook said she won’t support further rate cuts without clearer evidence that inflation is easing.
- Safe-haven demand for Silver eases after Iran confirms talks with the US in Oman on Friday.
Silver price (XAG/USD) pares its daily losses, yet remains in the negative territory, trading around $80.50 per troy ounce during the early European hours on Thursday. Silver price plunged as much as over 16% as precious metals faced renewed selling pressure amid hawkish signals from the Federal Reserve (Fed) and easing geopolitical tensions.
Fed Governor Lisa Cook said she would not back another cut without clearer evidence that inflation is easing, stressing greater concern over stalled disinflation than labor market weakness. Investors also weighed the implications of Kevin Warsh’s nomination as Fed chair, citing his preference for a smaller balance sheet and a less aggressive approach to rate reductions.
Safe-haven demand for precious metals, including Silver, fades after Iran confirmed it would hold talks with the United States (US) in Oman on Friday. However, Silver prices gained ground on media reports suggesting the talks might collapse, but officials from both sides later said discussions would proceed as scheduled, even though the agenda remains unsettled.
Iranian Foreign Minister Abbas Araghchi said talks will be held in Oman on Friday, while a White House official confirmed continued engagement on a potential nuclear deal. Uncertainty persists over the scope, with Tehran aiming to limit discussions to its nuclear program and Washington seeking to include missiles, regional militancy, and human rights.
The dollar-denominated grey metal also fell as a stronger US Dollar (USD), driven by hawkish Fed signals and slower rate-cut expectations, weighed on the Silver price. A firmer Greenback raises Silver’s cost for non-US buyers, dampening demand, while higher US yields increase the opportunity cost of holding non-yielding 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
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.
