Silver Price Forecast: XAG/USD climbs to near record high above $85.50 on Fed uncertainty
- Silver price gains momentum near $85.75 in Tuesday’s early European session.
- Uncertainty surrounding the US central bank and geopolitical risks boost the safe-haven flows, supporting the silver price.
- US December CPI inflation report will be closely watched on Tuesday.
Silver price ( XAG/USD) holds positive ground around $85.75 during the early European session on Tuesday. The white metal is set to retest a record high as traders pile into safe-haven metals amid renewed concerns over the US Federal Reserve (Fed) and its independence.
Fed Chair Jerome Powell said on Sunday that the US Department of Justice has served the central bank with subpoenas and threatened it with a criminal indictment over Powell’s testimony last June about the Fed’s building renovations. He called the threats a "pretext" aimed at putting pressure on the Fed to cut interest rates. Fed uncertainty ignites safe-haven assets such as Silver in the near term.
“We see increased interference with the Fed as a key bullish wildcard for the precious metals in 2026,” said Julius Baer Group’s Carsten Menke. The silver market, smaller in size, is more sensitive to moves in rates and the dollar, so it’s “likely to react more strongly to such concerns,” he added.
Rising geopolitical tensions might contribute to Silver’s upside. Civilian protests in Iran are rising, and hundreds have been killed. Iran’s foreign minister claimed security forces had "full control" of the country following two weeks of ongoing upheaval, blaming Israel and the US for fomenting the nationwide protests in which hundreds of people have been killed.
Traders will keep an eye on the US December Consumer Price Index (CPI) inflation data, which will be released later on Tuesday. This report could offer some hints about the US interest rate path and the next key trigger for market moves. In case of a hotter-than-expected outcome, this could lift the US Dollar (USD) and weigh on the USD-denominated commodity price in the near term.
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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