Silver Price Forecast: XAG/USD tumbles to near $53.50 on profit-taking
- Silver price falls to around $53.65 in Friday’s early Asian session, losing 1.20% on the day.
- Analysts warned of a short-term correction after Diwali, citing traders' profit-taking.
- Safe-haven demand and Fed rate cut bets could support the Silver price.
Silver price (XAG/USD) slumps to near $53.65 during the Asian trading hours on Friday. The white metal retreats from a record high of $54.86 in the previous session. However, the potential downside for Silver might be limited amid robust safe-haven demand and US interest rate expectations.
Analysts expect that silver prices might face some profit-taking, at least in the short run. With festive buying expected to taper off after Diwali, the market could begin to normalize. "This volatility is likely to ease after the festive demand tapers off. Post-Diwali, we might see the market normalizing as arbitrage returns and premiums compress. I expect this to start from next week onwards," said Renisha Chainani, head of research at Augmont, an integrated platform for gold and silver investments.
On the other hand, escalating trade tensions between the US and China, along with the geopolitical risk and US government shutdown, could boost the safe-haven flows, supporting the Silver price. US President Donald Trump began a trade war with China, raising concerns about long-term impacts on the economy, even as US Treasury Secretary Scott Bessent suggested a longer truce before raising tariffs further.
Federal Reserve (Fed) Chair Jerome Powell on Tuesday signaled that the US central bank is on track to deliver another quarter-point reduction later this month. Traders are now pricing in nearly a 98% possibility of a 25 basis points (bps) Fed rate reduction in October, followed by another cut in December, which is fully priced in, according to Reuters. 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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