Silver Price Forecast: XAG/USD remains below $61.00 as oil prices surge
- Silver declines as higher crude oil prices, driven by Middle East energy risks, and renewed inflation fears.
- Easing Federal Reserve rate-hike expectations following soft US labor data provided crucial support for silver prices.
- Multi-decade US Treasury yields, driven by high debt issuance and inflation risks, continued to cap Silver's upside.
Silver price (XAG/USD) declined after opening at a bullish gap, remaining in positive territory and trading around $60.90 per troy ounce during Asian hours on Wednesday. Non-yielding Silver experienced downside pressure as a rebound in crude oil prices, driven by persistent Middle East supply risks, kept inflationary concerns and rate-hike expectations firmly in focus.
Oil markets climbed as escalating threats to regional energy flows overshadowed signs of recovering supply. Attacks on tankers in the Strait of Hormuz have intensified, with the UK Maritime Trade Operations reporting nine incidents already this month. Adding to regional tensions, a Saudi-led coalition intercepted and destroyed a Houthi ballistic missile targeting Khamis Mushait in Saudi Arabia, while traders also weighed potential production disruptions from a developing storm threatening major US energy hubs in the Gulf of Mexico.
Despite these headwinds, Silver prices found some support as expectations for further Federal Reserve tightening eased after last week's softer US labor market data. According to the CME FedWatch tool, interest-rate swaps reflect roughly a 20% probability of a rate hike at the Fed's upcoming October meeting. Nonetheless, US Treasury yields held near multi-decade highs, underpinned by sticky inflation risks, growing fiscal deficits, and heavy debt issuance tied to expanding AI investments.
Systematic Silver flows eyed as TD Securities flags key trigger level
According to TD Securities, their Advanced CTA Position Tracker highlights that trend-following funds remain only modestly engaged in silver, with CTAs currently holding a small net short around “-2% of maximum historical size.” The report identifies a key downside trigger level at “$60.71 -2.9%,” which is part of TD’s scenario analysis mapping how systematic flows could evolve across both “big downtape to big uptape” paths in silver over the coming year.
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.