Silver Price Forecast: XAG/USD struggles near $38.00 due to diminished odds of Fed cuts
- Silver price edges lower as strong US economic data has reduced the chances of the Fed easing monetary policy.
- US Retail Sales rose 0.6% month-over-month and increased 3.9% year-over-year in June.
- Fed Governor Adriana Kugler stated that it is appropriate to maintain the current policy interest rate for the time being.
Silver price (XAG/USD) holds mild losses after two days of gains, trading around $38.20 per troy ounce during the Asian hours on Friday. The non-interest-bearing Silver attracts some sellers as the upbeat economic data from the United States (US) has dampened the likelihood of the Federal Reserve (Fed) easing monetary policy. It is important to note that higher interest rates make precious metal Silver less attractive for investors seeking higher returns.
US Retail Sales rose by 0.6% month-over-month in June versus -0.9% prior. This figure came in above the market consensus of 0.1%. Meanwhile, the annual Retail Sales climbed 3.9%, compared to a rise of 3.3% in May. Moreover, Initial Jobless Claims for the week ending July 12 fell to 221K from 228K, and came in below the expected 235K.
Furthermore, Federal Reserve Governor Adriana Kugler noted that it is appropriate to keep the policy rate of interest steady “for some time,” given low unemployment and building price pressure from tariffs. Kugler highlighted that inflation remains above the 2% target, and the labor market is stable and resilient.
San Francisco Fed President Mary Daly stated that rate cuts twice this year are a "reasonable" outlook, while cautioning against waiting too long. Meanwhile, Fed Governor Christopher Waller said that he believes that the Fed should reduce its interest rate target at the July meeting, citing mounting economic risks. Waller added that delaying cuts runs the risk of needing more aggressive action later.
The safe-haven Silver may regain its ground amid prevailing global trade tensions. US President Donald Trump stated on Wednesday that he plans to send letters to over 150 countries, notifying them of a 10% tariff rate they will face. He also hinted the rate could rise to 15–20%, though he did not confirm any specifics.
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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