Silver Price Forecast: XAG/USD remains below $44.00 due to cautious Fedspeak

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Silver price (XAG/USD) continues its retreat after reaching 14-year highs, trading around $43.90 per troy ounce during the Asian hours on Wednesday.

Silver falls as Fed’s Powell warns Fed must balance persistent inflation with weakening labor market.
CME FedWatch tool indicates nearly a 90% possibility of a Fed rate cut in October.
The safe-haven Silver may appreciate following fresh US President Donald Trump’s tariff threats on Russia.

Silver price (XAG/USD) continues its retreat after reaching 14-year highs, trading around $43.90 per troy ounce during the Asian hours on Wednesday. The price of the non-interest-bearing Silver declines as Federal Reserve (Fed) Chair Jerome Powell struck a cautious note, stressing that the US central bank must weigh stubborn inflation against a softening job market, calling it “a challenging situation” and reiterating comments from last week.

Money markets are currently pricing in nearly a 90% possibility of a Fed rate cut in October, down slightly from 92% a day earlier, according to the CME FedWatch tool. Traders await the upcoming US Q2 Gross Domestic Product Annualized and Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve’s preferred inflation gauge, due later in the week.

The flash reading of S&P Global Purchasing Managers Index (PMI) showed that US business activity slowed in September. Composite PMI ticked down to 53.6 from 54.6 in August, pointing to a private sector that seems to be struggling to strengthen further. Manufacturing PMI eased to 52.0 from 53, signalling waning momentum in the sector. Services PMI slipped to 53.9 from 54.5, suggesting demand there may be easing.

The safe-haven Silver may regain its ground following fresh US President Donald Trump’s tariff threats on Russia. At the United Nations (UN) General Assembly on Tuesday, President Trump warned that the United States (US) is ready to impose a “very strong round of powerful tariffs” if Russia refuses to end the war in Ukraine. Trump also criticized European countries for buying Russian energy, arguing that “they are funding the war against themselves,” and urged the EU to join Washington in implementing tariffs to ensure their effectiveness.

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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