Silver Price Forecast: XAG/USD slips below $64.00 as inflation fears increase
- Silver declines as global bond selloff drives 10-year US Treasury yield to a 2025 high of 4.80%.
- Rising US-Iran conflict spikes crude oil prices, threatening Middle East energy supplies.
- Mixed US economic data leaves investors watching upcoming employment reports for Fed clues.
Silver price (XAG/USD) extends its losses for the second successive day, trading around $63.40 per troy ounce during the Asian hours on Wednesday. The non-yielding Silver declines as a global bond selloff drove the US 10-year Treasury yield up to 4.80%, hitting its highest point since early 2025. This surge in yields reignited market anxieties surrounding stubborn inflation and the possibility of further interest rate increases.
Compounding these inflationary concerns, crude oil prices spiked due to intensifying geopolitical friction between the United States and Iran, which threatens energy supplies out of the Middle East. According to TD Securities, the latest flare-up between the US and Iran is reinforcing the sense that the regional backdrop remains highly unstable. Strategists there argue that the renewed tensions “continue to highlight how flimsy any deal or MoU headlines really are,” underscoring the market’s sensitivity to further disruptions and helping to sustain a risk premium across the energy complex.
Meanwhile, recent economic data from the United States offered a mixed picture for investors. July JOLTS job openings fell short of expectations, landing at 7.27 million. At the same time, the ISM Manufacturing PMI dipped to 54.6 in August from 55.6 in the previous month. While the PMI missed estimates, it stayed comfortably in expansion territory, indicating ongoing strength in the manufacturing domain. Market focus is now shifting to the upcoming ADP employment report and Friday's nonfarm payrolls for clearer signals on the Federal Reserve's rate strategy.
Fed’s Barr keeps hawkish bias as inflation risks keep rate hike option alive
Fed’s Barr delivered a slightly more hawkish-than-usual message, with the FXS Speechtracker score at 7/10 versus a 6.8/10 historical average, underscoring concern that inflation “remains too high” despite a stable labor market and “solid” AI-driven growth. The conditional guidance — favoring steady rates only if there is confidence inflation is moderating, but explicitly flagging a potential rate hike if it does not — reinforces an asymmetric reaction function tilted toward tightening. Overall, the tone signals a low tolerance for renewed price pressures and keeps upside risks for the Dollar intact.
The FXS Fed Sentiment Index slipped by 0.42 points to 128.86, indicating a modest pullback in perceived hawkishness even as the index remains firmly above the neutral 100 mark. This configuration suggests that, while the immediate speech tone was only marginally above the established baseline in the FXS Speechtracker, the broader policy backdrop stays clearly hawkish, with the FXS Fed Sentiment Index still signaling a bias that supports the Dollar against lower-yielding currencies.
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
FXStreet
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.
