Silver Price Forecast: XAG/USD surges to near $69.00 amid heightened volatility
- Silver jumped nearly 6% this week as investors fled volatile currency and bond markets.
- Massive US debt buybacks initially drove yields and the dollar lower, supporting precious metal gains.
- Middle East tensions and rising oil prices raise inflation risks that could cap further Silver’s upside.
Silver price (XAG/USD) extends its gains for the third successive day, trading around $68.70 per troy ounce during the Asian hours on Friday. Silver prices rise as investors turn to safe-haven metals amid heightened volatility across global currency and bond markets.
Silver price is up nearly 6% this week after the US Treasury Department announced plans to at least double its long-term debt buybacks. This move aimed to contain borrowing costs, driving Treasury yields and the dollar sharply lower. Silver continued its upward momentum even after yields reversed Wednesday’s decline, fueled by concerns that government efforts to rein in long-term borrowing costs may only offer a temporary fix.
US yields rebound as Dollar slide extends after Treasury buyback move
Brown Brothers Harriman’s Elias Haddad observes that “US long-term Treasury yields have retraced most of Wednesday's drop triggered by the US Treasury’s buyback announcement, while USD has extended its decline.” He frames the buyback initiative as a debt-management exercise that has largely unwound the initial move in longer-dated yields even as the Dollar continues to soften, underscoring lingering market unease around the policy signal embedded in the Treasury’s action.
However, further gains for non-yielding Silver could be capped by rising oil prices, which continue to highlight persistent inflationary risks and boost expectations for interest rate hikes. These energy market pressures stem from escalating tensions between the United States (US) and Iran over control of the crucial Strait of Hormuz.
Oil supply fears persist as Iran tensions keep crude flows tight
According to TD Securities, the backdrop for crude remains constrained, with “negotiations on hold for weeks and a shift toward economic pressure” reinforcing the view that “crude flows in the market will remain critically tight.” The bank also warns that “Iranian aggression in the Oman lane will likely remain the norm,” underscoring ongoing geopolitical risks that continue to support a structurally tight oil market.
Washington is preparing to severely restrict Iran's economy in an initiative labeled an "economic D-day," with formal details expected on Monday. The proposed US measures seek to sever Tehran's access to global commercial and financial networks by targeting banks, shipping registries, cash transfers, and smuggling operations to force negotiations over its nuclear program and regional transit.
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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