Silver Price Forecast: XAG/USD holds ground above $29.50 as Fed’s Powell turns dovish
- Silver price appreciates as Fed Chair Jerome Powell believes that the central bank is getting back on the disinflationary path.
- The non-yielding Silver might gain ground as recent US inflation data raised the expectations of the Fed reducing rates in 2024.
- Safe-haven Silver might attract investors as Israeli forces conducted airstrikes across the southern Gaza Strip on Tuesday.
Silver price (XAG/USD) continues its winning streak for the fifth day, trading around $29.70 per troy ounce during the Asian session on Wednesday. The price of silver is possibly bolstered by investor reaction to Federal Reserve (Fed) Chair Jerome Powell’s somewhat dovish remarks.
On Tuesday, Powell said that the Fed is getting back on the disinflationary path. However, Powell wants to see further evidence before cutting interest rates as the US economy and the labor market remain strong, per Reuters.
Additionally, Chicago Federal Reserve Bank President Austan Goolsbee cautioned on Tuesday during an interview with CNBC, stating, "I see some warning signs that the real economy is weakening." Goolsbee further mentioned that progress toward the Fed's 2% inflation target could accelerate more swiftly than anticipated.
The price of the grey metal also gained ground as the recent US inflation data raised the expectations of the Federal Reserve (Fed) reducing interest rates in 2024. US Personal Consumption Expenditures (PCE) Price Index increased by 2.6% year-over-year in May, down from 2.7% in April. Lower interest rates could spark the demand of non-yielding assets like Silver.
Geopolitical tensions persist in the Middle East as Israel intensifies its operations in Gaza, prompting Palestinians to evacuate Khan Younis amid fears of further attacks. Israeli forces conducted airstrikes across the southern Gaza Strip on Tuesday, leading to widespread displacement among Palestinians. These developments, reported by Reuters, highlight heightened tensions and may bolster demand for safe-haven assets such as Silver.
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.
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