Silver Price Forecast: XAG/USD falls to near $35.50 as traders lock in profits
- Silver price declines aid profit-taking and liquidating positions to offset losses elsewhere.
- The safe-haven Silver loses flows after reports suggesting easing of the US aggression on Iran.
- The People’s Bank of China announced that keep its Loan Prime Rates unchanged on Friday.
Silver price (XAG/USD) extends its losses for the third consecutive session, trading around $35.80 during the early European hours on Friday. The price of the precious metal depreciates as traders take profits and liquidate positions to offset losses in other assets.
Additionally, the precious metals, including Silver, attract sellers due to decreased safe-haven demand, driven by reports suggesting easing of the US rhetoric toward Iran. The absence of negative developments in the Iran-Israel conflict front so far this Friday, boosting market sentiment and reviving risk appetite.
US President Donald Trump reportedly said that he will offer Iran a last chance to negotiate the end of its nuclear program. Trump noted on Thursday that he would delay his final decision on launching strikes for up to two weeks.
The non-interest-bearing Silver could have struggled as the Federal Reserve (Fed) Chair Jerome Powell cautioned that ongoing policy uncertainty will keep the Fed in a rate-hold stance. Higher interest rates tend to support elevated yields, drawing investors in search of better returns."
In a post-meeting press conference on Wednesday, Powell also noted that inflation remains somewhat above goal and could rise in the future. He highlighted the importance of the current policy stance that leaves the central bank well-positioned. The Fed announced to leave the interest rate unchanged at 4.5% in June as widely expected.
Moreover, the People’s Bank of China (PBOC) decided to leave its Loan Prime Rates (LPRs) unchanged on Friday. The one-year and five-year LPRs were at 3.00% and 3.50%, respectively. The price of the grey metal faces challenges as the higher borrowing cost in China, one of the world's largest manufacturing hubs of electronics, solar panels, and automotive components, the country's industrial demand for Silver is significant.
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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