Silver Price Forecast: XAG/USD falls to near $36.50 despite renewed risk aversion
- Silver price struggles despite renewed concerns about the independence of the US Federal Reserve.
- President Trump may announce his preferred candidate to lead the Federal Reserve next year.
- Iranian Foreign Minister Abbas Araghchi refused to resume nuclear negotiations with the United States.
Silver price (XAG/USD) edges lower after registering gains in the previous two sessions, trading around $36.50 per troy ounce during the Asian hours on Friday. The downside of the prices of the precious metals, including Silver, could be restrained due to renewed concerns over the US Federal Reserve’s (Fed) independence.
US President Donald Trump called, at the Hague on the sidelines of the NATO summit, the Federal Reserve Chair Jerome Powell “terrible” and shared that he has several potential successors in mind. “I know within three or four people whom I’m going to pick.” Trump could weaken Powell’s authority by announcing his preferred candidate by September or October to lead the central bank next year.
Moreover, traders may adopt caution due to the potential for weakening market sentiment, driven by the recent comments from the Iranian Foreign Minister Abbas Araghchi. Araghchi said that Tehran has no intention of resuming nuclear negotiations with the United States. “No agreement or arrangement has been made to resume negotiations. Neither any promise has been given, nor any discussion has taken place on this matter,” He added as per CNN.
US Gross Domestic Product (GDP) showed a 0.5% contraction in the first quarter, came in worse than the previous estimate and the market expectation of -0.2%. The downbeat GDP data further supports dovish expectations from the Fed; however, this was offset by Jobless Claims falling to a five-week low at 236K and Durable Goods Orders posting a 16.4% increase, the biggest gain in 11 years. Markets now await the PCE inflation report later for the Fed’s further direction.
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.