Silver Price Forecast: XAG/USD marks three-month highs near $32.50 amid risk-off mood
- Silver prices surged to a three-month high of $32.38 on Wednesday.
- Safe-haven metals gain ground amid risk-off mood following global trade and economic uncertainties.
- Traders await Friday’s US Nonfarm Payrolls, which is expected a slight slowdown in job creation for January.
Silver price (XAG/USD) rises for the third successive session, trading around $32.30 per troy ounce, during the European hours on Wednesday. The safe-haven metals like Silver gain ground due to increased risk aversion following global trade and economic uncertainties.
In response to the new 10% US tariff that took effect on Tuesday, China imposed a 15% tariff on US coal and liquefied natural gas (LNG) imports, along with an additional 10% tariff on crude oil, farm equipment, and certain automobiles.
However, traders remain hopeful for a potential resolution between the United States (US) and China, similar to the agreements reached with Mexico and Canada. US President Donald Trump stated on Monday that he expects to speak with China soon but warned, “If we can't reach a deal with China, the tariffs will be very, very substantial.” However, no further developments have been reported.
Trump, earlier this week, announced a temporary suspension of tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 troops to the US border to combat drug trafficking. The tariffs initially imposed two days earlier—25% on Mexican and Canadian goods have been postponed for at least 30 days.
The dollar-denominated Silver attracts buyers as the US Dollar (USD) goes through a technical downward correction. The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, remains under downward pressure for the third successive day, trading around 107.70 at the time of writing. Meanwhile, traders brace for Friday’s US Nonfarm Payrolls (NFP) data, which is expected to shape the Federal Reserve’s (Fed) monetary policy direction.
Silver, which does not yield interest, is benefiting from the dovish stance of major central banks. The Bank of Canada (BoC) has halted its quantitative tightening and joined Sweden’s Riksbank in cutting interest rates. Last week, the European Central Bank (ECB) lowered its Deposit Facility Rate by 25 basis points (bps) to 2.75%, while both the Reserve Bank of India (RBI) and the People’s Bank of China (PBoC) have signaled potential rate cuts ahead. Additionally, markets expect the US Federal Reserve (Fed) to implement two rate cuts this year.
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.