Silver Price Forecast: XAG/USD looks vulnerable near $54, Fed’s policy in focus
- Silver price trades cautiously near $54 ahead of the Fed’s policy announcement on Wednesday.
- The Fed is expected to hold interest rates steady in the 3.75%-4.00% range.
- Elevated oil prices continue to keep the Silver price under pressure.
Silver price (XAG/USD) trades with caution in the European trade on Monday, closer to its fresh Year-Till Date (YTD) low of $53 posted on Friday. The white metal is broadly under pressure as elevated oil prices underpin fears that the Federal Reserve (Fed) will maintain a hawkish monetary policy stance for a longer period.
Brent rallies on Middle East risk as Fed meeting revives inflation worries
Analysts at Commerzbank note that “escalating Middle East tensions pushed oil prices higher and revived inflation concerns ahead of Wednesday’s Fed meeting,” with “Brent the standout mover, rising 6.2% last week to just under USD117.” They stress that “the Middle East remains the principal geopolitical risk,” underscoring how the region’s instability is increasingly feeding back into the inflation narrative as policymakers prepare to convene.
For fresh cues regarding the Fed’s monetary policy outlook, financial markets await the monetary policy announcement on Wednesday. The Fed is highly anticipated to leave interest rates steady in the range of 3.75%-4.00%. Investors will closely track the monetary policy statement and the press conference of Fed Chairman Kevin Warsh.
Remarks from Fed Chair Warsh since returning the Fed have signaled that he is not interested in providing guidance on the monetary policy outlook; however, he has indicated several times that inflationary pressures have remained very high.
Silver Technical Analysis
In the daily chart, XAG/USD trades at $53.84, keeping a bearish near-term bias as price holds well below the 20-day Exponential Moving Average (EMA) at $58.27. The distance between spot and the EMA suggests that rallies remain capped by overhead supply, while the Relative Strength Index (14) hovering near 31 hints at emerging oversold conditions that could slow the downside rather than reverse it outright.
On the topside, the July 17 low at $57.77 is the initial resistance, followed by the 20-day EMA at $58.27. On the downside, the Silver price could enter a fresh downside leg if it drops below the YTD low at $53.03.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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