Silver Price Forecast: XAG/USD climbs above $49.50 amid uncertainty, Fed rate cut bets

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Silver price (XAG/USD) climbs to around $49.70 during the Asian trading hours on Friday. The white metal holds positive ground after reaching the highest price in four decades, bolstered by safe haven flows, strong industrial demand, and expectations of the US interest rate cut.

Silver price rises to near $49.70 in Friday’s Asian session.
Economic uncertainty, geopolitical risks and expectations of lower interest rates support the Silver.
The preliminary reading of U-Mich Consumer Sentiment report and Fedspeak will be the highlights later on Friday.

It has been ten days since the US government shutdown began on October 1, owing to a failure by Congress to agree on a new budget by the September 30 deadline. Economic uncertainty from concerns about tariffs, the US federal shutdown, and geopolitical risks could boost the safe-haven asset like silver.

“There’s just a lot of concern about the global economy, and when that happens, people turn to hard assets like silver,” said Michael DiRienzo, CEO of the Silver Institute.

Additionally, the prospect of a rate cut from the Federal Reserve (Fed) might contribute to Silver’s upside. Traders are currently pricing in nearly a 95% odds that the Fed cuts rates by 25 basis points (bps) at its October meeting, while the possibility of an additional reduction in December declines to 82%, from 90%, in the past week, according to the CME FedWatch tool. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding precious metal.

Traders will keep an eye on the preliminary reading of the U-Mich Consumer Sentiment report later on Friday. Also, the Fed’s Goolsbee and Musalem are scheduled to speak later on the same day. If the report shows a stronger-than-expected outcome, this could lift the US Dollar (USD) and weigh on the USD-denominated commodity price.

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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