Silver Price Forecast: XAG/USD breaks below $41.50 as Fed cut bets wane
- Silver price declines as strong US inflation outlook limits odds for aggressive Fed rate cuts.
- Fed Chair Jerome Powell highlighted increasing signs of labor market weakness amid concerns about inflation driven by tariffs.
- The Bank of England and the Bank of Japan are expected to keep the policy rate unchanged this week.
Silver price (XAG/USD) extends its losing streak for the third successive session, trading around $41.30 during the Asian hours on Thursday. The non-interest-nearing Silver loses ground amid a strong inflation outlook that has curbed expectations of more aggressive Federal Reserve (Fed) rate cuts. The Federal Open Market Committee’s (FOMC) projection showed that policymakers see inflation ending this year at 3% at the median, well above the central bank's 2% target.
The Federal Reserve (Fed) delivered a 25-basis-point rate cut on Wednesday and indicated a further 50 bps of easing before year-end, slightly above its June projections. Moreover, the Bank of Canada (BoC) also cut its policy rate by 25 bps, while the Bank of England (BoE) and Bank of Japan (BoJ) are expected to maintain steady policy this week.
Fed Chair Jerome Powell pointed to growing signs of weakness in the labor market to explain why officials decided it was time to cut rates after holding them steady since December amid concerns over tariff-driven inflation.
However, the downside of the Silver could be restrained by strong industrial demand from solar, electric vehicles, and electronics, as well as ongoing supply constraints. India’s silver imports are also expected to gain momentum in the coming months, supported by firm investment and industrial demand that has already absorbed the surplus from last year’s elevated shipments, according to industry officials cited by Reuters.
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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