Silver Price Forecast: XAG/USD holds losses near $64.50 as US-Iran peace optimism fades

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Silver price (XAG/USD) loses ground for the third successive day, trading around $64.70 per troy ounce during the European hours on Friday. Silver price remains under pressure as persistent concerns over inflation and high interest rates are revived by mounting oil supply anxieties.

Silver stays subdued as inflation and interest rate fears are revived by mounting oil supply concerns.
Traders adopt caution as US-Iran talks collapse after US VP Vance cancels Swiss summit trip.
Non-yielding Silver faces headwinds as traders price in hawkish sentiment surrounding the Federal Reserve's policy outlook.

Market sentiment turned cautious following a CNN report that US Vice President JD Vance canceled his scheduled trip to the Bürgenstock summit, a development that ultimately triggered the collapse of critical US-Iran negotiations.

A spokesperson for Vice President Vance downplayed the disruption, emphasizing that the logistics surrounding these complex negotiations "have never been simple or predictable." The official statement added that no alternative departure plans will be set in motion until a concrete update on the diplomatic situation is firmly established.

The Swiss Foreign Ministry confirmed that the meetings scheduled for Friday have been called off. Meanwhile, Iranian state-aligned media reported that the postponement of their delegation's travel was triggered by ongoing Israeli attacks in southern Lebanon.

Additionally, the non-yielding Silver faces challenges as the traders price in the hawkish sentiment surrounding the Federal Reserve (Fed) policy outlook. Higher borrowing costs increase the opportunity cost of holding non-interest-bearing assets like Silver, reducing their appeal.

The newly appointed Federal Reserve (Fed) Chairman Kevin Warsh emphasized during the post-meeting conference that "price stability" remains the Fed's ultimate guiding principle. Nearly half of the Federal Open Market Committee (FOMC) officials indicated that at least one more rate hike may be necessary later this year.

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.