Silver Price Forecast: XAG/USD attracts some buyers to near $41.00 as US NFP data looms

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Silver price drifts higher to around $40.85, up 0.45% on the day.
Expectations that the US Fed will cut interest rates later this month support the Silver price.
Traders brace for the US August Nonfarm Payrolls report later on Friday.

The Silver price (XAG/USD) attracts some buyers near $40.85 during the Asian trading hours on Friday, bolstered by the weaker US Dollar (USD). The white metal receives support from the prospect of the US Federal Reserve (Fed) rate cut this year. Traders await the release of the highly-anticipated US August Nonfarm Payrolls (NFP) report later on Friday for fresh impetus.

Data released on Thursday showed that the US Initial Jobless Claims increased more than expected last week. Additionally, the ADP National Employment Report revealed that US private payrolls increased less than expected in August.

These reports indicated softening labor market conditions, reinforcing the Fed rate reduction expectation. This, in turn, weighs on the US Dollar (USD) and lifts the USD-denominated commodity price. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding white metal.

Additionally, geopolitical tensions might contribute to the white metal’s upside, as it is considered a safe-haven asset. The US is looking to pressure buyers of Russian crude to push Moscow into agreeing to a truce in Ukraine. US Treasury Secretary Bessent said on Tuesday that the US "will be examining sanctions on Russia very closely this week" due to the ongoing war in Ukraine.

The US NFP report will be closely watched later on Friday. This reading could offer some hints about the US interest rate path. Economists forecast to see 75,000 job additions in August. In case of a stronger-than-expected outcome, this could boost the Greenback and drag the Silver price lower in the near term.

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.