Silver Price Forecast: XAG/USD falls below $31.00 despite escalated geopolitical tension
- Silver price may regain its ground due to safe-haven flows amid the rising Russia-Ukraine war.
- The dollar-denominated Silver may gain demand as the US Dollar depreciates due to market optimism.
- The non-interest-bearing Silver could face challenges due to increased odds of the Fed slowing the pace of rate cuts.
Silver price (XAG/USD) retraces its recent gains, trading around $30.80 per troy ounce during the Asian session on Monday. This decline may be linked to a technical pullback, similar to the weakness seen in precious metal Gold. However, Silver, as a safe-haven asset, could regain its momentum due to the escalating Russia-Ukraine conflict.
On Friday, President Vladimir Putin confirmed that Russia conducted a hypersonic intermediate-range missile test in an attack on the Ukrainian city of Dnipro. The Kremlin stated that the strike was a retaliatory measure in response to Ukraine's first assault on Russian territory using US and British-supplied weapons.
Silver prices may receive additional support from a weaker US Dollar following the announcement by US President-elect Donald Trump of his nomination of hedge fund manager Scott Bessent as the new US Treasury Secretary. Bessent, a seasoned Wall Street figure and fiscal conservative, is expected to adopt a more cautious stance on tariffs, alleviating concerns about the implementation of aggressive trade policies.
The non-interest-bearing Silver might have faced downward pressure due to the potential for a higher opportunity cost over a prolonged period. This could be attributed to the strong preliminary S&P Global US Purchasing Managers' Index (PMI) data released on Friday, which has fueled expectations that the Federal Reserve (Fed) may slow the pace of rate cuts.
Futures traders are now assigning a 50.9% probability to the Federal Reserve cutting rates by a quarter point, down from approximately 61.9% a week earlier, according to the CME FedWatch Tool.
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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