Silver Price Forecast: XAG/USD remains near 54.00 due to improved market sentiment
- Silver price remains steady near record high of $54.86 after intraday gains.
- The grey metal could limit its upside due to improved market sentiment following the end of the US government shutdown.
- The precious metal advanced amid uncertainty surrounding the US economic outlook and the Fed's stance.
Silver price (XAG/USD) continues its winning streak for the fifth successive session, nearing the all-time high of $54.86, which was recorded on October 16, and is currently trading around $54.00 per troy ounce during the early European hours on Thursday.
The upside of the safe-haven Silver could be limited as market sentiment improves amid the end of the United States (US) government shutdown. US President Donald Trump signed the government funding bill on Thursday, marking the official end of the longest government shutdown in US history. The bill requires the Government to resume normal operations and call for direct payment for individuals to purchase healthcare.
The non-interest-bearing Silver gained support amid uncertainty over the US economic outlook and Federal Reserve (Fed) policy direction. Weaker-than-expected private labor data for October strengthened expectations of potential Fed policy easing, as the ADP Employment Change report on Tuesday indicated an average weekly job loss of 11,250 in the four weeks to October 25.
However, the likelihood of the Federal Reserve (Fed) rate cut in December faded following recent hawkish Fedspeak. The CME FedWatch Tool shows markets pricing in nearly a 60% chance of a 25-basis-point Fed rate cut in December, down from 67% a day ago.
Atlanta Fed President Raphael Bostic addressed economic trends at the Atlanta Economic Club on Wednesday. Bostic cautioned that easing policy too soon could “feed the inflation beast,” while noting that a sharp downturn in the labor market is unlikely in the near term.
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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