Silver Price Forecast: XAG/USD jumps to 14-year high above $48.50 amid Fed cut bets and US turmoil
- Silver price climbs to near $48.60 in Wednesday’s early European session.
- Uncertainty surrounding a US government shutdown and the prospect of a Fed rate cut support the Silver price.
- The FOMC Minutes and Fedspeak will be the highlights later on Wednesday.
Silver price (XAG/USD) rises to around $48.65 during the early European trading hours on Wednesday. The white metal edges higher to near the 14-year high amid mounting expectations of Federal Reserve (Fed) rate cuts and the ongoing US government shutdown.
The US government shutdown entered its eighth day on Wednesday. Rising uncertainty levels could boost the safe-haven flows, supporting the Silver price. US President Donald Trump said on Tuesday that his administration plans to lay off federal workers if the shutdown persists beyond Monday, adding that he would provide details of job cuts within the next four or five days.
The shutdown has postponed the release of US Nonfarm Payrolls (NFP) data, forcing investors to rely on secondary data to gauge the timing and extent of Fed rate cuts. Investors are now pricing in a 25 basis points (bps) cut at the Fed’s October meeting, with an additional 25 bps reduction anticipated in December. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding precious metal.
Investors will take more cues from the FOMC Minutes later on Wednesday for more cues about the US interest rate outlook. Additionally, the Federal Reserve officials are scheduled to speak. Any hawkish comments from Fed policymakers could underpin the US Dollar (USD) and weigh on the USD-denominated commodity price in the near term.
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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