Silver Price Forecast: XAG/USD remains above $30.50 due to reinforced Fed’s dovish stance

Source Fxstreet
  • Silver price appreciated as softer US Inflation sparked speculation of the Fed implementing two interest rate cuts in 2025.
  • The dollar-denominated Silver gains support as the weaker US Dollar makes it more affordable for buyers using foreign currencies.
  • Silver demand could weaken as overcapacity in China’s solar panel industry drives photovoltaic companies to join a government self-discipline program.

Silver price (XAG/USD) remains stable at around $30.70 per troy ounce during the Asian session on Thursday. The price of the non-yielding metal gained support as December's lower-than-expected underlying inflation in the US sparked speculation that the US Federal Reserve (Fed) might implement two interest rate cuts this year.

Meanwhile, 2-year and 10-year US Treasury bond yields stand at 4.27% and 4.66%, respectively, at the time of writing. Both yields dropped by over 2% on Wednesday. Additionally, the US Dollar Index (DXY), which gauges the US Dollar's (USD) performance against six major currencies, is trading near 109.00, extending its downside for the fourth successive session. A weaker USD makes the precious metal more affordable for buyers using foreign currencies, which boosts the demand for Silver.

The US CPI rose by 2.9% year-over-year in December, up from 2.7% in November, matching market expectations. The monthly CPI increased by 0.4%, following a 0.3% rise in November. US Core CPI, excluding volatile food and energy prices, increased by 3.2% annually in December, slightly below both the previous month's 3.3% and analysts' forecast of 3.3%. Core CPI edged up by 0.2% month-over-month in December 2024.

Overcapacity in China’s solar panel industry has prompted photovoltaic companies to join a government self-discipline program designed to regulate supply, which could limit the outlook for Silver demand from this key sector. Additionally, reports of forced labor practices in solar panel factories in the Xinjiang region of China have led the US to impose import bans on selected manufacturers.

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.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Natural Gas sinks to pivotal level as China’s demand slumpsNatural Gas price (XNG/USD) edges lower and sinks to $2.56 on Monday, extending its losing streak for the fifth day in a row. The move comes on the back of China cutting its Liquified Natural Gas (LNG) imports after prices rose above $3.0 in June. It
Author  FXStreet
Jul 01, 2024
Natural Gas price (XNG/USD) edges lower and sinks to $2.56 on Monday, extending its losing streak for the fifth day in a row. The move comes on the back of China cutting its Liquified Natural Gas (LNG) imports after prices rose above $3.0 in June. It
placeholder
200,000 New Investors Buy Ripple (XRP) 30-Days After Gensler’s Farewell: What Next for Stellar (XLM)? Ripple (XRP) price consolidated around $2.40 on Thursday, up 11% since Monday, technical indicators suggest Stellar (XLM) has joined the rally.
Author  FXStreet
Yesterday 02: 31
Ripple (XRP) price consolidated around $2.40 on Thursday, up 11% since Monday, technical indicators suggest Stellar (XLM) has joined the rally.
placeholder
Top 3 Price Prediction Bitcoin, Ethereum, Ripple: BTC consolidates while ETH and XRP show some strengthBitcoin (BTC) consolidated between $94,000 and $100,000 in the last nine days.
Author  FXStreet
Yesterday 05: 46
Bitcoin (BTC) consolidated between $94,000 and $100,000 in the last nine days.
placeholder
Crude Oil price today: WTI price bullish, according to FXStreet dataWest Texas Intermediate (WTI) Oil price advances on Friday, according to FXStreet data.
Author  Mitrade
Yesterday 09: 19
West Texas Intermediate (WTI) Oil price advances on Friday, according to FXStreet data.
placeholder
Gold on its way to hit another fresh all-time highGold’s price (XAU/USD) edges higher, trading at around $2,935 at the time of writing on Friday, and holds good cards to close out this week with a new all-time high and solid gains.
Author  FXStreet
Yesterday 09: 47
Gold’s price (XAU/USD) edges higher, trading at around $2,935 at the time of writing on Friday, and holds good cards to close out this week with a new all-time high and solid gains.
Related Instrument
goTop
quote