Silver Price Forecast: XAG/USD remains close to $54.50 near record highs

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Silver price maintains its position near an all-time high of $54.86, reached on Thursday.
The precious Silver metal receives support from credit market concerns in the United States.
Robust Indian demand tightened supply, leading mutual fund houses to halt inflows into their Silver ETF fund-of-fund schemes.

Silver price (XAG/USD) extends its three-day rally, trading around $54.30 per troy ounce during the Asian hours on Friday. The price of the grey metal remains close to the record high of $54.86, reached in the previous session amid increased safe-haven demand. The market sentiment turned cautious following the disclosures from two US regional banks, Zions Bancorporation and Western Alliance, about troubled loans.

Silver price surged amid a historic squeeze in London, where dwindling liquidity has triggered a global scramble for the metal. Strong demand from India has further tightened supply, prompting several mutual fund houses to suspend inflows into their Silver ETF fund-of-fund schemes.

Silver attracts buyers due to increased risk aversion, which could be attributed to the escalating United States (US)-China trade tensions. US Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent criticized China’s plans to restrict rare earth exports, calling them “economic coercion” and “a global supply chain power grab.” Bessent warned, “If China wants to be an unreliable partner to the world, then the world will have to decouple.”

Additionally, the precious metals, including Silver, gain ground amid risk-off sentiment, driven by the prolonged US government shutdown. The impasse will continue into next week as the US Senate once again failed to pass a Republican bill to extend funding and end the stalemate.

The non-yielding Silver receives support from the increased likelihood of further rate cuts by the US Federal Reserve (Fed). The CME FedWatch Tool indicates that markets are now pricing in nearly a 97% chance of a Fed rate cut in October and an 83% possibility of another reduction in December.

Fed Governor Christopher Waller stated on Thursday that he supports another interest rate cut at this month’s upcoming policy meeting. Meanwhile, the Fed’s newest governor, Stephen Miran, reiterated his call for a more aggressive rate-cut trajectory for 2025 than that favored by his colleagues. The Fed’s Beige Book pointed to growing economic strains, citing rising layoffs and weaker spending among middle- and lower-income households.

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.