Silver Price Forecast: XAG/USD holds losses below $62.50 on Fed hike bets

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Silver price (XAG/USD) halts its four-day winning streak, trading around $62.30 per troy ounce during the European hours on Monday. The white metal edges lower as market expectations solidify around a Federal Reserve (Fed) interest rate hike later this year.

Silver edges lower on prevailing odds of a Fed interest rate hike by the end of 2026.
The CME FedWatch tool indicates that markets price around a 77% chance of year-end Fed rate hikes.
Silver may regain ground as last week's weak US labor data forced markets to temper September rate hike expectations.

According to the CME FedWatch tool, financial markets are currently pricing in around 77% probability of a rate increase by year-end. Investors will likely closely monitor US ISM Services PMI due later in the day for immediate direction, though primary focus has shifted to Wednesday’s release of the Fed's June policy Meeting Minutes for clearer guidance on the future path of interest rates.

This minor decline follows a stellar previous week, where Silver surged over 5.55%. That rally was sparked by weak US labor data, which forced markets to temper expectations for a September hike. June's Nonfarm Payrolls (NFP) grew by just 57,000, well below the 110,000 forecast. While the headline unemployment rate unexpectedly ticked down to 4.2% from May's 4.3%, the aggressive slowdown in hiring underscores a broader economic cooling.

Meanwhile, easing oil prices have helped dampen the inflationary pressures that previously heightened fears of aggressive rate hikes. Energy markets moved lower due to recovering flows through the Strait of Hormuz and the prospect of increased OPEC+ supply. This cooling energy sector has mitigated a key macro headwind, providing some structural relief to non-yielding precious metals like Silver.

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.