Silver Price Forecast: XAG/USD moves above $30.00 due to weaker US Dollar
- Silver price gains momentum as the weakening US Dollar makes the metal more accessible to buyers holding foreign currencies.
- The US Dollar faces challenges following reports of the incoming Trump administration adopting a more targeted approach in applying tariffs.
- Silver demand increases as China commits to adopting "more proactive" macroeconomic policies and lowering interest rates to drive economic growth.
Silver price (XAG/USD) extends its winning streak for the fourth successive day, trading around $30.20 per troy ounce during the European hours on Tuesday. The price of the dollar-denominated grey metal gains momentum as a weaker US Dollar (USD) makes it more affordable for buyers using foreign currencies, thereby boosting Silver demand.
The US Dollar Index (DXY), which tracks the USD's performance against six major currencies, remains under pressure for the third straight session following reports that the incoming Trump administration might adopt a more targeted approach in applying tariffs. The DXY falls to near 108.00 at the time of writing.
However, Trump refuted a Washington Post report suggesting his team was considering limiting the scope of his tariff plan to only cover specific critical imports. The US Dollar may find some support following President-elect Donald Trump's comments that his tariff policy will not be scaled back.
US ISM Services Purchasing Managers Index (PMI) is set to be released on Tuesday. On Wednesday, markets will focus on the Minutes from the Federal Reserve's (Fed) December policy meeting. Investors will closely monitor the US employment data for December, which is due later on Friday. This report could offer some hints about the Fed’s interest rate outlook in 2025.
Silver demand was further bolstered by a positive economic outlook in China, the world's largest consumer of the metal. Beijing recently committed to adopting "more proactive" macroeconomic policies and lowering interest rates this year to drive economic growth.
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.