Silver Price Forecast: XAG/USD holds below $52.50 as easing trade tensions cap safe-haven demand
- Silver price trades on a negative note around $52.35 in Tuesday’s early Asian session.
- Trump admitted that the additional 100% tariffs he proposed on China were not sustainable.
- Fed rate cut bets might help limit Silver’s losses.
Silver price (XAG/USD) declines near $52.35 during the early Asian session on Tuesday. The white metal retreat from last week’s record high due to the safe-haven demand eased as trade tensions between the US and China softened. Traders will take more cues about the US interest rate path from the speech of Federal Reserve (Fed) Bank Governor Christopher Waller later on Tuesday.
Analysts believe that Silver might decline on profit-booking, as traders cash in on their gains. Additionally, US President Donald Trump on Friday sought to ease trade tensions with China, saying that his proposed 100% tariff on goods from China would not be sustainable. His softer tone and confirmation of his intention to meet with Chinese President Xi Jinping this week help to mitigate trade tensions between the world’s two largest economies. This, in turn, dampens the safe-haven demand and drags the Silver price lower.
On the other hand, Fed rate cut expectations and dovish comments from Fed officials might lift the white metal. Fed Governor Christopher Waller said that he is on board for another interest rate cut at the Fed's meeting later this month, citing the mixed readings on the state of the job market.
Meanwhile, St. Louis Fed President Alberto Musalem said that he could support a path with another rate cut if more risks to jobs emerge and inflation is contained. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding precious metal.
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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