Silver Price Forecast: XAG/USD holds gains near $66.00 on US-Iran peace progress

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Silver price (XAG/USD) advances after three days of losses, hovering around $66.00 per troy ounce during the European hours on Monday. However, Silver price gains ground as oil prices and inflation concerns ease following a positive development regarding the United States (US)-Iran peace deal.

Silver rises as easing oil and inflation concerns fade on the US-Iran reaching a fresh agreement.
Qatar and Pakistan announced that Washington and Tehran agreed to a formal roadmap targeting a peace deal within 60 days.
Non-yielding Silver could face potential pressure as traders weigh a hawkish shift in the Fed's monetary policy outlook.

Mediators Qatar and Pakistan issued a joint statement from Switzerland announcing that both Washington and Tehran have agreed to a formal roadmap aimed at securing a final peace agreement within the next 60 days.

Additionally, Iranian Foreign Minister Abbas Araqchi confirmed that the diplomatic progress yielded several major concessions for his country. In addition to the vital export waivers for oil and petrochemicals, the agreed-upon terms include the release of a portion of Iran's frozen financial assets, alongside the official launch of a comprehensive domestic reconstruction and development plan.

However, on Sunday, US President Donald Trump threatened direct strikes on Iran if proxy attacks on Israel continue. This warning severely clouded the outlook for diplomatic progress and threatened to dismantle the current peace framework, casting a shadow over the first round of interim talks held between Vice President JD Vance and Iranian officials.

However, the non-yielding Silver may further face challenges as traders could weigh on a hawkish shift in the Federal Reserve's (Fed) policy outlook. Last week's central bank meeting, where policymakers left interest rates unchanged but adopted a distinctly hawkish stance. Notably, 9 out of 19 FOMC members now project at least one interest rate hike this year, prompting market participants to actively price in a potential increase as early as September.

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.