Silver Price Forecast: XAG/USD jumps to near $51.00 amid uncertainty after the shutdown ends

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Silver price recovers to around $51.00 in Monday’s Asian session.
The release of the US September Nonfarm Payrolls will be in the spotlight on Thursday.
The hawkish Fed’s comments might cap the upside for the Silver price.

Silver price (XAG/USD) trades in positive territory near $51.00 during the Asian trading hours on Monday. The white metal edges higher amid uncertainty following the end of the US government's shutdown. Federal Reserve officials are set to speak later on Monday, including John Williams, Philip Jefferson, Neel Kashkari and Christopher Waller.

Markets are bracing for a flood of delayed economic reports that could signal a slowing US economy. The US Nonfarm Payrolls (NFP) will take center stage later on Thursday. This report could offer clarity to the Fed rate outlook in December. Any signs of weakness in the US labor market could drag the US Dollar (USD) lower and underpin the USD-denominated commodity price.

"I think the risk is definitely skewed to a weaker payrolls print, and that would just reignite market expectations about a December FOMC rate cut and send the U.S. dollar down,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA).

On the other hand, hawkish remarks from Fed policymakers ahead of a deluge of US economic data spooked traders and could weigh on the white metal. Kansas City Fed President Jeffery Schmid said on Friday that monetary policy should lean against demand growth, adding that current Fed policy is “modestly restrictive,” which he believes is appropriate.

Markets are now pricing in nearly a 40% possibility of a 25 basis points (bps) rate cut in the Fed’s December meeting, down from over 60% earlier this month, according to the CME FedWatch tool.

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.

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