Silver Price Forecast: XAG/USD remains calm above $73.50 as inflationary risks increase
- Silver struggles as the Strait of Hormuz closure keeps oil higher, boosting global inflation and prolonged higher rates globally.
- Trump threatened to attack Iran within days to force a war-ending deal following a brief pause.
- The US 30-Year Treasury Yield declines to 5.181% after hitting a near 19-year high of 5.200% on Wednesday.
Silver price (XAG/USD) remains flat after registering 5.18% losses in the previous day, hovering around $73.70 per troy ounce during the Asian hours on Wednesday. The white metal struggled as the prolonged United States (US)-Iran conflict has effectively kept the vital Strait of Hormuz closed to shipping traffic. This disruption has pushed oil prices higher, adding to inflationary pressures and increasing the likelihood of higher interest rates globally.
Geopolitical tensions escalated further as US President Donald Trump recently threatened to resume attacks on Iran within two or three days to force a deal ending the war, following a brief pause after a new proposal from Tehran. In response, an Iranian official asserted that the US threat of a massive assault would be met resolutely, stating that Iran is fully prepared to confront any military aggression.
These war-driven energy price pressures have significantly increased inflation risks in the United States, which have reinforced expectations that the Federal Reserve (Fed) may need to maintain higher interest rates for longer or even tighten monetary policy further. Additionally, a sharp increase in yields reflects renewed market concerns that inflation could remain elevated for longer than previously anticipated.
In the bond market, the US 30-Year Treasury Yield inched lower to 5.181% after reaching a nearly 19-year high of 5.200% on Wednesday. Meanwhile, shorter-term yields maintained their upward momentum, with the 10-Year Treasury Yield remaining stronger near its 16-month high of 4.687% and the 2-year yield holding near its 15-month high of 4.139%, both recorded on Tuesday.
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.