Silver Price Forecast: XAG/USD retreats from 14-year highs to below $45.00

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Silver price (XAG/USD) attracts some sellers to near $44.80 after reaching its highest in over 14 years during the Asian trading hours on Friday. Traders await the release of the US August Personal Consumption Expenditures (PCE) Price Index data later on Friday for fresh impetus.

Silver price faces some selling pressure around $44.80 in Friday’s Asian session.
A firmer US Dollar undermines the USD-denominated commodity price.
Rising geopolitical risks might cap the downside for the Silver price.

The precious metal has gained momentum in the previous sessions as markets expected at least two rate cuts from the Federal Reserve (Fed) in the remaining two Fed meetings this year. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding precious metal.

Nonetheless, the cautious tone from Fed officials lifts the US Dollar (USD) and weighs on the USD-denominated commodity price. Fed Chair Jerome Powell said on Tuesday that the policymakers continue to deal with the double whammy of potentially higher inflation and a slowing labor market. Powell added that the interest rates are in a good place to deal with either threat, suggesting he sees no urgency to lower rates aggressively.

Meanwhile, Fed Governor Stephen Miran preferred a more aggressive 0.50% cut, arguing that with temporary tariff effects aside, inflation was closer to the 2% target. Traders slightly pared back bets for a Fed rate cut by year-end to about 33%, according to LSEG data.

Ongoing geopolitical tensions in Europe and the Middle East might boost the safe-haven flows, helping limit Silver’s losses in the near term. On Thursday, Ukraine’s President Zelensky warned that Russian President Vladimir Putin "will keep driving the war forward wider and deeper" if he is not stopped. Russian aerial attacks have become larger and more frequent since Moscow scaled up its drone production at the start of the year. But while most of these assaults used to come at night, there have been more daytime threats in recent weeks.

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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