Silver Price Forecast: XAG/USD rebounds to near $73.50; outlook remains uncertain
- Silver price bounces back to near $73.50 despite multiple headwinds.
- Renewed Middle East tensions have prompted oil prices.
- The Fed is unlikely to cut interest rates this year.
Silver price (XAG/USD) recovers to near $73.50 during the European trading session on Thursday from its fresh four-week low of $71.79 posted earlier in the day. The recovery move in the Silver price appears to be short-lived, as it lacks fundamental backing.
Renewed Middle East tensions and growing Federal Reserve (Fed) concerns towards rising inflationary pressures are expected to remain major headwinds for the Silver price.
The Middle East crisis has re-escalated, following the exchange of attacks between the United States (US) and Iran. Meanwhile, a spokesperson from the Iranian Foreign Ministry has stated that Tehran condemns strikes near the Strait of Hormuz, a critical passage to almost 20% of global energy supply.
Theoretically, renewed geopolitical tensions improve the safe-haven demand of precious metals, such as Silver; however, it has been underperforming as higher oil prices due to restricted energy flows have forced traders to price out dovish Federal Reserve (Fed) bets.
The scenario of vanishing dovish Fed prospects bodes poorly for non-yielding assets, such as Silver.
According to the CME FedWatch tool, the odds of the Fed holding interest rates at their current levels this year are 43.1%, while the rest favor at least one interest rate hike this year. This is a sharp turnaround from two interest rate cuts anticipated before the Middle East war started.
Meanwhile, investors await the US Personal Consumption Expenditure Price Index (PCE) data for April, which will be published at 12:30 GMT.
Silver technical analysis
XAG/USD trades lower at around $73.50, maintaining a bearish near-term tone as price holds below the 20-day exponential moving average (EMA) at roughly $77.03 and beneath the broken rising trend-line reference around $78.27.
The Relative Strength Index (RSI) at about 43 stays below the neutral 50 line, hinting that downside momentum still outweighs buying interest even as the metal consolidates after its recent pullback.
On the topside, initial resistance is seen at the 20-day EMA near $77.03, which needs to be reclaimed to ease the current bearish pressure. A recovery move above the 20-day EMA could lead to a further upside towards $80.00. Looking down, the immediate support level for the white metal is $70.00 it falls back below the intraday low of $71,79.00. A close below $70.00 would expose the Silver price to further downside towards the March 26 low at $66.71.
(The technical analysis of this story was written with the help of an AI tool.)
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.
