Silver Price Forecast: XAG/USD trades firmly near $38, awaiting new FOMC member

Silver price demonstrates strength around $38.00 as Trump to announce Fed Kugler’s replacement this week.
Trump’s comments indicate that US Kevin Hassett, and former Fed Governor Kevin Warsh are potential candidates for Fed Chair.
Trump stated that he will announce tariffs on semiconductors, chips, pharmaceuticals after this week.

Sagar Dua FXStreet

Silver price (XAG/USD) holds onto gains around $38.00 during the European trading session on Wednesday. The white metal trades firmly, while investors await the entry of new member into the Federal Open Market Committee (FOMC) this week.

On Tuesday, United States (US) President Donald Trump confirmed, while speaking to reporters, that he will announce the replacement of Federal Reserve (Fed) Governor Adriana Kugler this week, who resigned on Friday.

Market experts believe that the entry of Trump’s candidate into the rate-setting committee will increase support for the resumption of the monetary-expansion cycle. Trump has criticized the Fed, especially Chair Jerome Powell, a several times for not lowering interest rates. Such a scenario will be favorable for non-yielding assets, such as Silver.

Meanwhile, US President Trump has also narrowed options for Jerome Powell’s successor to four and will announce his candidate soon. We’re also looking at the Fed chair, and that’s down to four people right now, Two Kevins and two other people," Trump said in an interview with CNBC on Tuesday. His comments signal that White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh are potential candidates to step in place of Powell.

Additionally, renewed fears of sectoral tariffs by President Trump have increased demand for safe-haven assets, such as Silver. Trump said on Tuesday that he will announce tariffs on “semiconductors and chips, and pharma” in the next week or so.

Silver technical analysis

Silver price clings to three-day gains near $38.00 on Wednesday. The white metal strives to return above the 20-day Exponential Moving Average (EMA), which trades around $37.65.

The 14-day Relative Strength Index (RSI) oscillates around 50.00, suggesting that the asset lacks momentum.

Looking down, the June 24 low of $35.28 will act as key support for the major. On the upside, the June 30 high near $38.25 will be a critical hurdle for the pair.

Silver daily chart

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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