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Silver Price Forecast: XAG/USD falls to near $60.50 as US Treasury yields rise

  • Silver hovers near two-month lows as rising US Treasury yields and a stronger dollar outweigh soft jobs data.
  • Fresh Middle East geopolitical tensions drove safe-haven demand into the US Dollar following Houthi strikes in Saudi Arabia.
  • Soaring service-sector inflation pushed yields to 24-year highs, despite high market expectations of a Fed rate pause.

Silver price (XAG/USD) pares its recent gains from the previous day, trading around $60.70 per troy ounce during Asian hours on Tuesday. Silver remains locked near two-month lows as a resilient US Dollar (USD) and surging Treasury yields continue to overshadow supportive economic drivers. While softer US employment figures and diminished expectations for an October interest rate hike by the Federal Reserve provided a temporary buffer, the broader precious metals market remains under pressure.

The US Dollar gained momentum as escalating geopolitical tensions in the Middle East sparked a fresh wave of safe-haven demand. According to Xinhua News Agency, Yemen’s Houthi group claimed responsibility on Monday for a series of coordinated strikes against Saudi Arabian targets using ballistic missiles, cruise missiles, and drones. Houthi spokesman Yahya Saree noted that the strikes hit military sites, an oil facility, and key transportation hubs, including King Khalid International Airport in Riyadh, where air traffic was disrupted, unsettling global markets.

Compounding the pressure on Silver, US Treasury yields rallied to fresh 24-year highs amid a relentless global bond selloff fed by expanding fiscal risks and sticky inflation. Recent ISM data highlighted that input costs within the US services sector surged at their fastest rate in over four years last month. Even with markets currently pricing in an estimated 78% chance that the Federal Reserve will hold interest rates steady following weaker labor market reports, rising yields and a firm dollar maintain the upper hand.

G7 yields climb as HSBC highlights sharp repricing in long-dated bonds

Strategists at HSBC note that “G7 bond yields have risen by roughly 1% since January, with long-dated US Treasuries and UK Gilts moving well above 5%.” They describe this as a “sharp repricing” in core rates markets, and point out that “three explanations compete to explain” the move, setting the stage for a broader debate over the underlying drivers of higher real yields and the implications for fixed income investors.

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.

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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