Silver Price Forecast: XAG/USD rises to near $53.00 as lower oil eases inflation pressure

Silver gains as oil falls following Trump's comments downplaying near-term military action against Iran.
Non-yielding XAG faces headwinds as CME FedWatch shows a 78%+ chance of a December rate hike.
Robust October Nonfarm Payrolls (165K) and falling unemployment (4.1%) could boost the Greenback, capping Silver's rally.

Silver price (XAG/USD) appreciates after two days of losses, trading around $53.00 per troy ounce during the Asian hours on Monday. Silver price advances as declining oil prices eased inflationary pressures.

Crude prices dropped after US President Donald Trump stated that further military strikes on Iran are "highly unlikely," provided progress continues on Iran's nuclear program and the Strait of Hormuz remains open. Trump also noted that the unpopular Middle East conflict, which pushed up energy costs, contributed to the Republicans' recent midterm election losses.

TMGM талдауы: Қаржы нарығы жаңалықтары, экономикалық күнтізбе және нарықтық шолулар

Reuters reported that in a phone interview with CNN, Trump reaffirmed that additional military action would likely be unnecessary if Iran signs a firm agreement. Despite earlier hints at resuming major attacks after the midterms, no large-scale US military operations have been launched. Meanwhile, Iran has warned that it will retaliate against any future strikes by targeting US and Israeli assets.

However, non-yielding Silver may face challenges amid expectations of a Federal Reserve (Fed) rate hike in December. According to the CME FedWatch tool, the probability of another 25-basis-point rate hike at the December Federal Open Market Committee (FOMC) meeting has climbed above 78%.

Robust US employment figures are providing significant support for the Greenback. Specifically, Nonfarm Payrolls (NFP) increased by 165,000 in October, easily topping the market consensus of 65,000 and building on September's revised total of 60,000, while the Unemployment Rate edged down to 4.1%, beating expectations of 4.2%. Traders are now closely watching Tuesday's US Consumer Price Index (CPI) report and Friday's Producer Price Index (PPI) for further signals regarding the Fed's upcoming policy decisions.

US data and Fed speakers in focus as Dollar repricing gathers pace

Strategists at ABN Amro underline that the immediate test for the recent shift in Fed expectations and associated Dollar weakness will come from the US calendar, noting that “three US events will test the repricing of Fed expectations and the USD’s downside risks today.” They point to the combination of scheduled data releases and Fed communication as critical for validating whether markets have gone too far in scaling back tightening prospects and in pricing further downside for the USD.

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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