Silver Price Forecast: XAG/USD marks fresh 14-year highs above $42.00
- Silver price gains ground amid rising likelihood of three Fed rate cut bets by the end of this year.
- Weaker US labor market conditions strengthen the case for multiple Fed rate cuts in 2025.
- Safe-haven demand for Silver has risen on the back of ongoing geopolitical tensions on multiple fronts.
Silver price (XAG/USD) extends its winning streak for the third successive session, marking a fresh 14-year high at $42.17 during the Asian hours on Friday. The precious Silver attracts buyers as market expectations for three Federal Reserve (Fed) rate cuts this year increase after US Weekly Initial Jobless Claims climbed to their highest since October 2021.
The increased jobless claims, along with last week’s weak Nonfarm Payrolls report, overshadow a hotter-than-expected consumer inflation reading. It’s worth noting that when interest rates are low, investors often turn to non-yielding assets in pursuit of higher returns.
The US Department of Labor (DoL) reported on Thursday that US Initial Jobless Claims rose to 263K, the highest since 2021, against the expected 235K and 236K prior (revised from 237K). Meanwhile, the US Bureau of Labor Statistics (BLS) released an inflation report, showing the annual Consumer Price Index (CPI) rising 2.9% in August, as expected. The CPI inflation climbed to 0.4% month-over-month from a 0.2% increase prior.
Safe-haven demand for Silver has strengthened amid persistent geopolitical tensions. On Wednesday, Poland intercepted Russian drones in its airspace with support from NATO military aircraft, while Israel intensified its offensive on Tuesday by targeting Hamas political leaders. Moreover, China’s most advanced aircraft carrier, the *Fujian*, recently transited the Taiwan Strait and entered the South China Sea—both highly sensitive waterways, per Reuters.
On the industrial front, robust demand from the solar, electric vehicle, and electronics sectors continues to tighten the physical Silver market, which remains constrained by ongoing supply shortages.
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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