Silver Price Forecast: XAG/USD maintains position around $34.50 due to safe-haven demand
- Silver price receives support from increased safe-haven demand amid rising economic uncertainty.
- The weaker US economic data increased the odds of the Fed delivering rate cuts twice in 2025.
- President Trump called upon Fed Chair Powell to lower the policy rate after the ADP employment data.
Silver price (XAG/USD) edges higher after registering losses in the previous two successive sessions, trading around $34.50 per troy ounce during the Asian hours on Thursday. Prices of the precious metals, including Silver, receive support from safe-haven flows amid growing global economic and political uncertainty.
The non-yielding assets like Silver receive support after the release of soft economic data from the United States (US), which reinforced the odds of the Federal Reserve (Fed) reducing interest rates at least twice in 2025.
Institute for Supply Management's (ISM) Services Purchasing Managers Index (PMI) declined to 49.9 in May, from 51.6 in April. This reading surprisingly came in weaker than the expected 52.0. Meanwhile, US ADP private sector employment rose 37,000 in May, against a 60,000 increase (revised from 62,000) recorded in April, far below the market expectation of 115,000.
Traders will likely observe the US Balance of Trade and the weekly Initial Jobless Claims later in the North American session. Focus will shift toward Friday’s Nonfarm Payrolls to gain further insights into the Fed’s policy outlook.
US President Donald Trump called upon, in a post published on Truth Social on Wednesday, Federal Reserve (Fed) Chairman Jerome Powell to lower the policy rate. "ADP NUMBER OUT!!! “Too Late” Powell must now LOWER THE RATE. He is unbelievable!!! Europe has lowered NINE TIMES," Trump said.
On Wednesday, Minneapolis Fed President Neel Kashkari noted that the labor market is showing some signs of slowing down. However, persistent uncertainty prevails over the economy, and the Fed must stay in wait-and-see mode to assess how the economy responds to the uncertainty.
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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