Silver Price Forecast: XAG/USD rises above $60.00 amid less hawkish Fed tone

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XAG/USD gains ground for the third consecutive day, trading around $60.20 per troy ounce during the Asian hours on Thursday. Silver prices find support following a less hawkish tone than expected from Federal Reserve (Fed) Chairman Kevin Warsh at Wednesday's ECB Forum on Central Banking.

Silver rises as Fed Chair Kevin Warsh's surprisingly less hawkish comments reduce the urgency for immediate interest rate hikes.
Plunging oil prices and easing supply anxieties via the Strait of Hormuz further boosted Silver.
Soft US economic data further cooled hawkish Fed sentiment, reducing expectations for aggressive future interest rate hikes.

Fed Chair Warsh noted that while inflation remains too elevated, reiterating the Fed's firm commitment to its 2% target and institutional independence, eased inflation expectations over the past month suggest there is no immediate urgency to raise interest rates. Notably, he refrained from giving explicit guidance for the upcoming July policy decision, leaving markets to weigh the central bank's next move.

Meanwhile, a sharp downturn in the global energy market further boosted the precious metal. Crude oil benchmarks slid significantly as supply anxieties and inflation fears eased, driven primarily by a rapid recovery in maritime traffic through the Strait of Hormuz. This positive momentum was amplified by notable breakthroughs in indirect diplomatic talks between Washington and Tehran, lowering geopolitical risk premiums across commodities.

A batch of soft US economic data further cooled the hawkish sentiment surrounding the Fed outlook. June’s ADP Employment Change report showed that private payrolls grew by just 98K, missing Wall Street's 113K forecast and slowing from May's 122K increase. Additionally, the manufacturing sector showed signs of cooling as the ISM Manufacturing PMI edged lower to 53.3, missing the 54.0 consensus estimate. Together, this cooling data and diplomatic progress have investors shifting their full attention to the upcoming Nonfarm Payrolls report for fresh insights into the labor market and the Fed’s policy path.

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.