Silver Price Forecast: XAG/USD rises to near $66.00 as US-10 year yield slides
- Silver advances as lower oil prices ease inflation fears and pull down US Treasury yields.
- US 10-year yield retreats to 4.93% following Saudi pipeline progress and diplomatic developments.
- Fed Chair Warsh signals hawkish outlook, driving October rate hike expectations to 53.1%.
Silver price (XAG/USD) gains ground for the second successive day, trading around $65.80 per troy ounce during the Asian hours on Friday. Non-yielding Silver gained support as falling oil prices helped ease inflation concerns, which in turn pushed government bond yields lower.
Crude prices declined following news that Saudi Arabia was working to restore flows through its East-West pipeline, while market focus also turned to upcoming meetings between US President Donald Trump and Gulf leaders. Concurrently, US Treasury yields pulled back from recent multi-year highs, with the benchmark 10-year yield falling to around 4.93% after briefly breaching the 5.0% mark earlier in the week.
Lower oil and gas prices offer brief relief to bonds as Fed hawkishness lingers
Strategists at Societe Generale report that the bond market “received a helping hand from lower oil and gas prices at the open this morning,” after news via Axios that “the US plans to resume negotiations over Iran with Gulf States next week.” They note that “sellers initially pounced on the hawkish Fed hike last night,” with “10y UST yields dipped to 4.93% as risk assets retreated on the upward revision of the dot plot and the neutral rate, before recovering to 5.02% in Asia.”
Meanwhile, investors continued to assess the path forward for Federal Reserve monetary policy after its first rate hike in three years. Fed Chair Kevin Warsh signaled a hawkish stance, stating that inflation has remained too high for too long and emphasizing that recent summer economic data failed to show meaningful structural improvement. In the wake of his remarks, market expectations shifted, with the CME FedWatch tool indicating that traders are now pricing in a 53.1% probability of another rate hike at the Fed's October meeting, up from 44% the previous day.
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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