Silver price rallies to six-week high ahead US jobs data

Silver climbs to around $64.10, up 4.16% on Friday, reaching a fresh six-week high.
Fading expectations of further Fed rate hikes continue to support precious metals ahead of the US jobs report.
Geopolitical tensions in the Middle East are also underpinning safe-haven demand as investors await the NFP report.

Ghiles Guezout FXStreet

Silver (XAG/USD) extends its strong rally on Friday, trading around $64.10 at the time of writing, up 4.16% on the day. The white metal reaches a fresh six-week high and is on track for its best weekly performance since February, supported by fading expectations of further interest rate hikes from the Federal Reserve (Fed) and persistent demand for safe-haven assets.

Markets, however, remain cautious ahead of the release of the United States (US) Nonfarm Payrolls (NFP) report later in the day. Economists expect the US economy to have added 80K jobs in July after 57K in June, while the Unemployment Rate is forecast to remain unchanged at 4.2% and annual Average Hourly Earnings growth is expected to hold at 3.5%. The data could reshape expectations for the Fed's monetary policy path.

According to the CME FedWatch Tool, investors have scaled back expectations for additional monetary tightening in recent days, a factor that continues to support precious metals, which typically perform well when interest rate expectations ease.

Meanwhile, geopolitical developments continue to support demand for safe-haven assets. Tensions in the Middle East remain elevated following reports of potential escalation involving Iran, Ansar Allah in Yemen and Saudi Arabia, as well as renewed uncertainty surrounding the Strait of Hormuz.

Against this backdrop, the US employment report is expected to be the main short-term catalyst for Silver. A stronger-than-expected report could revive expectations of a more hawkish Fed and limit the metal's upside, while weaker data could weaken those expectations, providing additional support for XAG/USD.

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

Ghiles Guezout

FXStreet

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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