Silver Price Forecast: XAG/USD rebounds to near $73.50 on Middle East ceasefire odds

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Silver price (XAG/USD) holds gains after recovering daily losses, trading around $73.30 per troy ounce during the European hours on Monday.

Silver gains support on easing Fed hawkish sentiment, following reports suggesting potential Middle East ceasefire prospects.
US and Iran received a two-step ceasefire plan, but Tehran refuses to reopen the Strait of Hormuz temporarily.
Fed may delay rate cuts and could raise borrowing costs later this year if inflation remains persistently elevated.

Silver price (XAG/USD) holds gains after recovering daily losses, trading around $73.30 per troy ounce during the European hours on Monday. Non-interest-bearing Silver finds support as traders price in easing hawkish odds surrounding the Federal Reserve (Fed) outlook, following reports pointing to potential Middle East ceasefire prospects. News of US-Iran talks has pressured oil prices, helping to ease inflation concerns.

The United States and Iran have received a proposed framework to end hostilities, featuring a two-step plan with an immediate ceasefire followed by a broader agreement. Pakistan’s army chief, Asim Munir, has reportedly been in continuous contact with US Vice President JD Vance, special envoy Steve Witkoff, and Iranian Foreign Minister Abbas Araghchi. However, Tehran stated it would not reopen the Strait of Hormuz under a temporary ceasefire arrangement, according to Reuters.

Earlier, Bloomberg, citing Axios, reported that the US, Iran, and regional mediators are discussing terms for a potential 45-day ceasefire, following US President Donald Trump's warning that he would bring “hell” to Tehran if no deal is reached.

However, markets may continue to price in the Fed delaying rate cuts, with the possibility of higher borrowing costs later this year if inflation persists. Investors now await the latest Federal Open Market Committee Meeting Minutes for clearer guidance on the policy outlook.

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.