Silver Price Forecast: XAG/USD extends decline to near $63 amid continued energy supply risks

Silver price falls further to near $63 as global inflation projections remain de-anchored.
US President Trump confirms no talks with Iran are going on.
Investors await the FOMC Minutes of the July policy meeting.

Sagar Dua FXStreet

Silver price (XAG/USD) is down 0.5% to near $63.00 during the Asian trading session on Wednesday. The white metal extends its Tuesday’s decline amid fears of prolonged inflation concerns on the back of continued energy supply disruption.

As of writing, the WTI Oil price trades close to its two-week high at $85.11.

Higher oil prices de-anchor global inflation expectations, a scenario that prompts fears of interest rate hikes from global central banks. Such a case diminishes the appeal of non-yielding assets, like Silver.

The energy supply disruption seems unlikely to get fixed anytime soon as US President Donald Trump has confirmed that “there are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran”.

Meanwhile, investors await the Federal Open Market Committee (FOMC) minutes of the July policy meeting takes the centre stage, which will be published at 18:00 GMT. Investors should not anticipate major cues regarding the Federal Reserve’s (Fed) interest rate outlook, as Chairman Kevin Warsh remained stick to “no forward guidance” on policy rates.

Currently, the CME FedWatch tool shows that the Fed will leave interest rates unchanged in the September policy meeting.

Silver Technical Analysis

XAG/USD trades at $63.04, trading close to the 20-day Exponential Moving Average (EMA) at $62.41, suggesting a cautious near-term trend.

The Relative Strength Index (14) at 52.59 stays in neutral-to-positive territory, hinting that bullish momentum is still present but no longer overstretched.

On the downside, immediate support is located at the 20-day EMA at $62.41, where buyers are likely to defend the uptrend if corrective pressure extends, followed by the $60 round-level. Looking up, the August 10 high at around $66 act as key supply area.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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