Silver Price Forecast: XAG/USD tumbles below $72.00 as safe-haven appeal fades

Silver price falls to near $71.90 in Friday’s Asian session.
Easing geopolitical tensions and profit-taking weigh on the Silver price.
The initial jobless claims rose last week, above market consensus.

Lallalit Srijandorn FXStreet

Silver price (XAG/USD) slumps to around $71.90, the lowest since January 2, during the Asian trading hours on Friday. The white metal extends the decline amid easing geopolitical tensions and profit-taking. Traders will closely monitor the upcoming US-Iran talks later on Friday.

A reduction in tensions between the United States (US) and Iran weakens the safe-haven demand for precious metals. Iran aims to focus talks on its long-standing nuclear dispute with Western powers, while the US wants the agenda to include Tehran's ballistic missile program, its alleged backing of armed groups across the Middle East, and its domestic human rights record.

Analysts believe that speculative flows, leveraged positioning, and options-driven trading, rather than physical demand, are the primary drivers of recent price movements. “You’d seen a lot of speculator positions build up ... I don’t think it’s been fully flushed out,” said Sunil Garg, managing director of Lighthouse Canton.

On the other hand, signs of a weakening US labor market could undermine the US Dollar (USD) and support the USD-denominated commodity price in the near term. The US Bureau of Labor Statistics revealed on Wednesday that US job openings unexpectedly fell in December to the lowest level since 2020, and layoffs rose. Furthermore, applications for US unemployment benefits rose by more than forecast last week.

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

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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