Silver Price Forecast: XAG/USD climbs as US attack on Venezuela boosts safe-haven demand

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Silver price (XAG/USD) jumps to near $75.40 during the Asian trading hours on Monday. The white metal surges as the United States (US) attacks Venezuela, boosting the safe-haven demand.

Silver price rises to around $75.40 in Monday’s Asian session.
The US attacked Venezuela on Sunday, boosting safe-haven assets such as Silver.
The US ISM Manufacturing PMI data is due later on Monday.

Silver price (XAG/USD) jumps to near $75.40 during the Asian trading hours on Monday. The white metal surges as the United States (US) attacks Venezuela, boosting the safe-haven demand. Traders will closely monitor the developments surrounding the US seizure of the Venezuelan leader, as Maduro and his wife will appear in federal court later on Monday.

The US carried out a large-scale military strike against Venezuela on Saturday. US President Donald Trump announced that Venezuelan President Nicolas Maduro and his wife have been captured and flown out of the country.

Trump further stated early Monday that Washington might make a fresh military intervention if Venezuela’s interim president, Delcy Rodríguez, did not accommodate their demands, per the Guardian. The US attack on Venezuela is expected to trigger geopolitical tensions in the region and boost the safe-haven flows, which provide some support to the price of white metal.

Furthermore, growing expectations of further US interest rate cuts might contribute to Silver’s upside. Financial markets are currently pricing in two quarter-point Fed rate cuts this year. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding precious metal.

Traders await the release of the US ISM Manufacturing Purchasing Managers Index (PMI) data for December, which will be published later on Monday. If the report shows a stronger-than-expected outcome, this could lift the US Dollar (USD) and weigh on the USD-denominated commodity price in the near term. On Friday, the US Nonfarm Payrolls data will take center stage.

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.