Silver Price Forecast: XAG/USD edges lower to near $46.50 on profit-taking

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The Silver price (XAG/USD) declines to near $46.65 during the Asian trading hours on Friday. The white metal retreats from an all-time high on some profit-taking.

Silver price attracts some sellers to around $46.65 in Friday’s Asian session.
The US government shutdown delays US NFP data, boosting expectations of Fed rate cuts and supporting the Silver price.
Putin warned of a ‘new level of escalation’ if missiles were supplied to Ukraine.

The Silver price (XAG/USD) declines to near $46.65 during the Asian trading hours on Friday. The white metal retreats from an all-time high on some profit-taking. The potential downside for silver might be limited amid safe-haven flows, bolstered by global uncertainty and growing bets that the Federal Reserve (Fed) will need to ease policy further in the coming months.

The shutdown in the United States (US) has frozen key economic indicators, including the September Nonfarm Payrolls (NFP) release, leaving traders without key data to assess the labor market. This, in turn, could exert some selling pressure on the US Dollar (USD) and lift the USD-denominated commodity price. Due to the US government shutdown, traders will digest private-sector job market projections instead of the highly anticipated NFP report.

Furthermore, geopolitical risks in Russia and the Middle East could boost the safe-haven asset like Silver during periods of international instability. Russian President Vladimir Putin warned that supplying US missiles to Ukraine would lead to a “whole new level of escalation,” including in relations between Moscow and Washington. The Wall Street Journal reported on Thursday that the US will provide Ukraine with intelligence on long-range energy infrastructure targets deep inside Russia.

Meanwhile, hawkish remarks from the Dallas Fed President Lorie Logan on Thursday could weigh on the Silver price. Lorie noted that the US central bank appropriately cut rates last month to guard against the risk of a sharp deterioration in the job market, but said that so far the cooling has been gradual and signaled she is not eager to cut rates further.

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.