Silver Price Forecast: XAG/USD falls below $73.00 as Fed cuts bets fade on oil
- Silver falls as rising energy prices fuel inflation, reducing expectations for Fed and global rate cuts.
- CENTCOM said US forces will begin blockading all maritime traffic to and from Iranian ports at 10 AM ET Monday.
- Stronger March US CPI reinforced the Fed’s higher-for-longer stance, signaling rates may stay elevated for longer.
Silver price (XAG/USD) halts its five-day winning streak, falling over 2.5% and trading around $73.80 per troy ounce during the Asian hours on Monday. The non-interest-bearing white metal loses appeal as the effective shutdown of the Strait of Hormuz drives energy prices higher, heightening inflation and reinforcing expectations that the Federal Reserve (Fed) and other central banks may delay rate cuts or even tighten policy further.
West Texas Intermediate (WTI) opened the week with a bullish gap, trading about 7.5% higher near $97.10 per barrel at the time of writing. Crude oil prices rise due to the re-escalation of the conflict between the United States (US) and Iran.
US President Donald Trump said Washington would begin blockading all ships entering or leaving the Strait of Hormuz after US–Iran peace talks in Islamabad collapsed. The US Central Command (CENTCOM) added that forces will start blockading all maritime traffic to and from Iranian ports at 10 AM ET (14:00 GMT) on Monday.
Stronger US Consumer Price Index (CPI) March data reinforced the Federal Reserve’s (Fed) higher-for-longer stance. The US Bureau of Labor Statistics (BLS) reported on Friday that annual CPI rose to 3.3% in March from 2.4% in February, matching expectations. On a monthly basis, CPI increased 0.9% after 0.3% previously. Meanwhile, core CPI rose 0.2% month-over-month and 2.6% year-over-year.
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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