Silver Price Forecast: XAG/USD falls to near $66.50 as Fed signals further rate hikes
- Silver struggles as a hawkish Federal Reserve rate hike target of 3.75%–4.00% is weighing heavily on non-yielding assets.
- Markets price in an 89.2% chance of a December rate hike ahead of key US PMI economic data.
- Silver may find support if steadying oil prices and easing US-Iran geopolitical tensions reduce broader inflationary pressures.
Silver price (XAG/USD) depreciates after registering gains the previous day, trading around $66.50 per troy ounce during Asian hours on Wednesday. Non-yielding Silver faces challenges due to the Federal Reserve's hawkish monetary policy outlook. The US central bank recently raised its benchmark interest rate target by 25 basis points to the 3.75%–4.00% range, with policymakers signaling another potential rate increase before the end of the year. Financial markets are actively pricing in this trajectory, with the CME FedWatch Tool indicating nearly an 89.2% probability of a December rate hike as traders turn their attention to the upcoming preliminary US PMI data release later on Wednesday.
However, silver prices may regain ground as oil prices steady after five days of losses, helping to ease concerns over broader inflation. Oil prices could face downward pressure as US Special Envoy to the Middle East, Steve Witkoff, noted that the US held "lengthy" indirect talks with an Iranian delegation via mediators on the sidelines of the United Nations General Assembly (UNGA). Witkoff stated that mediators shuttled between the two sides throughout the day, completing a round of talks that officials hope will prove constructive and promising.
Adding to the shifting geopolitical dynamics, US President Donald Trump reported that US officials had a very good meeting with Iranian envoys. In response, Tehran indicated it could reopen the Strait of Hormuz within seven days if the US eases military pressure and lifts its blockade of Iranian ports.
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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