Silver Price Forecast: XAG/USD declines to near $57.40 as oil price remains broadly firm
- Silver price tumbles to near $57.40 amid elevated oil prices.
- Middle East tensions continue to support oil prices.
- The Fed is expected to hold interest rates steady in the policy meeting later this month.
Silver price (XAG/USD) is down 1.1% to near $57.40 during the European trading session on Wednesday. The white metal faces selling pressure as higher oil prices have prompted fears of elevated global inflation.
As of writing, the WTI Oil price is slightly higher to near $98.25. The oil price is close to its five-week high of $101.05 posted on Tuesday.
Continued attacks from Iran on oil ships and threats of attacking Saudi Arabia oil infrastructure keep heightening energy supply risks, backing risk premium to oil prices.
Analysts at Danske Bank highlight that oil prices have risen on mounting Middle East supply concerns, with traders increasingly wary of "Red Sea shipping risks and threats to oil infrastructure in Saudi Arabia." The bank notes that oil prices "have gained more than 10% this month" as "intensifying hostilities involving Saudi Arabia and Iran-backed Houthi forces, as well as Russia and Ukraine's attacks on energy infrastructure raised supply risks further," reinforcing the recent upward momentum in the market.
Heightened inflationary pressures could prompt Federal Reserve (Fed) interest rate hike expectations further, a scenario that boost yields on interest-bearing assets, but diminish the appeal of non-yielding assets, like Silver.
Currently, the Fed is expected to hold interest rates steady in the policy meeting later this month, according to the CME FedWatch tool.
Silver Technical Analysis
In the daily chart, XAG/USD trades at $57.25, holding below the 20-day exponential moving average (EMA) at $59.66, which keeps the near-term bias bearish. The metal is capped by this overhead dynamic barrier, suggesting rallies may struggle while price remains under the EMA. The Relative Strength Index (RSI) at 38.77 stays below the neutral 50 mark, hinting at lingering bearish momentum rather than an oversold extreme.
On the topside, initial resistance is defined by the 20-day EMA at $59.66, and a sustained break above this level would be needed to ease immediate downside pressure. On the downside, the July 17 low at $54.77 is the key support level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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