Silver Price Forecast: XAG/USD holds ground below $30.00 with a positive sentiment
- Silver price consolidates around a psychological level of $30.00 with a positive bias.
- Rising Middle-East tensions may provide support for the safe-haven Silver.
- The non-yielding grey metal receives support from rising expectations of a Fed rate cut in September.
Silver price (XAG/USD) hovers around $29.90 per troy ounce during the Asian session on Monday. The market sentiment is in favor of safe-haven assets following the rising geopolitical tensions in the Middle East.
Hamas has rejected new conditions proposed by Israel in ceasefire negotiations in Egypt, insisting that Israel adhere to the terms outlined by US President Joe Biden and the UN Security Council, according to reports from Al Jazeera.
After concluding a three-day trip to the Middle East, US Air Force General C.Q. Brown, chairman of the Joint Chiefs of Staff, told Reuters early Tuesday that concerns about an imminent broader conflict in the region have diminished following an exchange of fire between Israel and Lebanon's Hezbollah that did not escalate further.
Read more: Top US General Brown: Risk of broader war ‘somewhat’ abated after Israel-Hezbollah clash
The non-yielding assets like Silver gains ground amid rising odds of a rate cut by the US Federal Reserve (Fed) in September. Fed Chairman Jerome Powell stated at the Jackson Hole Symposium on Friday, "The time has come for policy to adjust." However, Powell did not specify when rate cuts would begin or their potential size.
Additionally, San Francisco Federal Reserve President Mary Daly stated on Monday in an interview with Bloomberg TV that "the time is upon us" to begin cutting interest rates, likely starting with a quarter-percentage point reduction.
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.