Silver Price Forecast: XAG/USD rises to near $65.40 with US inflation in focus
- Silver price rises to near $65.40 ahead of the US CPI data for July.
- The US headline and core CPI are expected to have grown at a moderate pace of 3.4% and 2.5% YoY, respectively.
- Oil prices continue to surge due to a sharp slowdown in traffic through the Hormuz.
Silver price (XAG/USD) trades 1.1% higher at around $65.40 during the Asian trading session on Wednesday. The white metal reflects strength ahead of the United States (US) Consumer Price Index (CPI) data for July, which will be published at 12:30 GMT.
According to estimates, the US headline CPI grew at an annual pace of 3.4%, slower than 3.5% in June. In the same period, the core CPI – which excludes volatile food and energy items – is also seen lower at 2.5% Year-on-Year (YoY) from the previous reading of 2.6%.
On a monthly basis, the headline and core inflation grew by 0.1% and 0.2%, respectively.
Investors will pay close attention to the US inflation data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook. In the latest monetary policy announcement, Chairman Kevin Warsh warned of upside inflation risks, adding that the board is committed to bringing inflation down to the 2% target.
Meanwhile, surging oil prices due to restricted global energy supply on the back of Middle East conflicts will likely limit the Silver price’s upside.
According to data from Kpler, shipping traffic through the Strait of Hormuz, a vital passage to almost 20% of global energy supply, was recorded at just six vessels on August 10, down from a recent 10-day average of about 11. This remains a massive decline from pre-war levels of 130 to 140 ships daily, Reuters reports.
On Tuesday, the CME Group said that it will allow round-the-clock trading in its 100-ounce silver futures contract from September after seeing a strong response for the 1-ounce Gold futures contract, which began on July 24, Reuters reports.
Silver Technical Analysis
In the daily chart, XAG/USD trades at $65.53, extending its advance above the 20-day exponential moving average (EMA) at $61.28 and reinforcing a bullish near-term bias.
Price action has steadily pushed away from the prior consolidation zone, while the Relative Strength Index (14) at 61.21 stays in positive territory but short of overbought, hinting that upside momentum remains constructive without being overstretched.
On the downside, immediate support is seen at the 20-day EMA around $61.28, which underpins the broader rebound and would be the first line of defense on any pullback. Looking up, the white metal would attempt to extend the advance towards the June 17 high at $71.56 if it manages to break above the August 10 high at $66.59.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.