Silver Price Forecast: XAG/USD holds gains near $78.50 on US-Iran deal optimism
Silver price (XAG/USD) rises nearly 4% after registering losses in the previous day, trading around $78.50 per troy ounce during the Asian hours on Monday.
  • Silver advances due to y easing inflation and interest rate concerns due to optimism over a potential US-Iran agreement.
  • The United States and Iran are close to signing a 60-day ceasefire extension agreement.
  • Fed Governor Waller signaled the central bank should drop its easing bias, complicating the global economic landscape.

Silver price (XAG/USD) rises nearly 4% after registering losses in the previous day, trading around $78.50 per troy ounce during the Asian hours on Monday. Non-yielding assets, including Silver, are receiving support from increasing optimism over a potential US-Iran agreement, which has eased broader market concerns about inflation and impending interest rate hikes.

According to a report by Axios citing a US official, the United States (US) and Iran are close to signing an agreement that involves a 60-day ceasefire extension. Under this proposed deal, the Strait of Hormuz would be reopened, and Iran would agree to clear mines it deployed in the waterway while allowing ships to pass freely. In exchange for these actions, the United States would lift its current blockade on Iranian ports.

However, complications remain, as Reuters reported, citing Iran’s Tasnim news agency, that the US government is still obstructing certain clauses of the agreement to end the conflict, specifically regarding the release of blocked Iranian assets. Further tempering immediate expectations, US Secretary of State Marco Rubio informed the New York Times that while an agreement with Iran has garnered regional support, a comprehensive nuclear deal could not be achieved quickly or carelessly.

Meanwhile, investors are continuing to assess the future outlook for Federal Reserve (Fed) policy. This caution comes after Federal Reserve Governor Christopher Waller signaled that he no longer believes the central bank should retain an easing bias in its official policy statement, adding another layer of complexity to the global economic landscape.

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.

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