Silver Price Forecast: XAG/USD holds gains near $33.00 due to increased safe-haven appeal
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- Silver price receives support from global uncertainties following fresh tariffs from US President Donald Trump.
- The latest FOMC Meeting Minutes emphasized needing more time to assess multiple factors before considering any rate adjustments.
- The grey metal found support from strong industrial demand driven by electrification and manufacturing.
Silver (XAG/USD) rebounds from recent losses recorded in the previous session, trading around $32.80 per troy ounce during Asian hours on Thursday. The grey metal gains momentum due to its safe-haven appeal remains strong amid global uncertainties. US President Donald Trump recently proposed a 25% tariff on automobiles, along with duties on semiconductors and pharmaceuticals.
However, the non-interest-bearing Silver faced little downward pressure as investors digest the latest Federal Open Market Committee (FOMC) Meeting Minutes, released on Wednesday, which reaffirmed the decision to keep interest rates unchanged in January.
Fed policymakers stressed the importance of further assessing economic activity, labor market trends, and inflation before considering any rate adjustments. They agreed that clear evidence of declining inflation is essential before implementing rate cuts. Some officials also expressed concerns that potential changes in trade and immigration policies could hinder the disinflation process. Additionally, certain inflation expectation measures have risen in recent months.
Markets are currently pricing in one rate cut for the federal funds rate in 2025, with the possibility of a second. Federal Reserve Vice Chairman Philip Jefferson stated late Wednesday that the US central bank has time to deliberate on its next interest rate move, citing a resilient economy and inflation still above target. Meanwhile, Chicago Fed President Austan Goolsbee noted that while inflation has declined, it remains elevated, emphasizing that interest rates could be lowered further once inflation reaches a more acceptable level, according to Reuters.
The precious metal gained support from strong industrial demand from electrification and manufacturing. China’s addition of 357 gigawatts of solar and wind power in 2024 further underscored Silver’s critical role in renewable energy. Additionally, the People’s Bank of China (PBOC) opted to keep its Loan Prime Rates (LPRs) unchanged, with the one-year and five-year rates remaining at 3.10% and 3.60%, respectively, signaling a cautious approach to monetary stimulus.
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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