Silver Price Forecast: XAG/USD slips to near $64.50 due to hawkish Fed stance
- Silver falls as Fed Chair Kevin Warsh’s unexpectedly hawkish debut and projections signaled potential interest rate hikes.
- The white metal may rebound as easing inflation concerns from progressing US-Iran peace talks revive broader market sentiment.
- US Vice President JD Vance noted that negotiations have made "great progress," despite some underlying friction.
Silver price (XAG/USD) loses over 1% after registering modest gains in the previous day, trading around $64.50 per troy ounce during the Asian hours on Tuesday. The non-yielding Silver struggles amid a hawkish policy outlook at the Federal Reserve (Fed).
Last week, the US central bank opted to hold its benchmark interest rate steady between 3.50% and 3.75%. However, the updated economic projections and commentary from Kevin Warsh, presiding over his first meeting as Fed Chair, surprised the market by leaning more hawkish than anticipated. As a result, futures traders have fully priced in a 25-basis-point rate hike for the September meeting, with some pricing in a minor probability of a tightening move as early as next month.
The downside of the Silver price could be restrained amid progress in ongoing peace talks between the US and Iran, which helped ease concerns about inflation. According to a CNBC report on Tuesday, US Vice President JD Vance noted that negotiations have made "great progress," despite some underlying friction. This followed Vance’s Monday announcement that Iran has agreed to readmit International Atomic Energy Agency (IAEA) inspectors. The optimism was mirrored by Iranian Foreign Minister Abbas Araghchi, who similarly confirmed that the Swiss dialogue has yielded "major progress."
Precious metals, including Silver, have faced persistent downward pressure since the outbreak of the Middle East conflict in late February. Disruptions to energy flows through the Strait of Hormuz initially drove crude oil prices higher, intensifying market fears that central banks would keep interest rates elevated to curb sticky inflation.
The supply outlook shifted after Washington issued Tehran a 60-day license to sell oil on international markets. This regulatory relief has fueled expectations of a faster recovery in global crude supplies, potentially easing the inflationary pressures that have weighed heavily on safe-haven assets.
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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