Silver Price Forecast: XAG/USD rises to near $48.50 as Fed rate cut bets increase
- Silver price appreciates on rising odds of a Fed rate cut in December, following soft Challenger Job Cuts data.
- CME FedWatch Tool suggests pricing in a 67% chance of a cut in December, down from 62% a day ago.
- The safe-haven Silver attracts buyers as the US government shutdown persists.
Silver price (XAG/USD) gains ground after recovering losses registered in the previous session, trading around $48.40 per troy ounce during the Asian hours on Friday. The non-interest-bearing Silver attracts buyers after soft United States (US) Challenger Job Cuts data increased the likelihood of the Federal Reserve (Fed) delivering a 25-basis-point rate cut in December.
Challenger, Grey & Christmas reported on Thursday that US companies announced over 153,000 job cuts in October, the highest for the month in more than two decades. The data tempered optimism from the rebound in ADP payrolls and kept uncertainty over the US labor market elevated. Markets are increasingly relying on private-sector reports, while the US government shutdown is restricting official data releases like Nonfarm Payrolls (NFP) and Unemployment Rate.
St. Louis Fed President Alberto Musalem said late Thursday that inflation risks remain tilted to the upside. Musalem noted that while tariffs are currently adding upward pressure to prices, their impact is expected to diminish next year. Fed funds futures traders are now pricing in a 67% chance of a cut in December, down from 62% a day ago, according to the CME FedWatch Tool.
Additionally, the safe-haven demand for precious metals, including Silver, increases as the US government shutdown extends further, hitting a record with still no solution in sight. The Senate is not currently set to vote on a House-passed measure to reopen the government on Thursday, after it failed to advance for the 14th time on Tuesday.
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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