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30 Sep 2024
Silver Price Forecast: XAG/USD loses traction to near $31.50 ahead of Fed’s Powell speech
- Silver price loses ground for the second consecutive day around $31.55 in Monday’s early Asian session.
- The upbeat mood weighs on the white metal price.
- Chinese stimulus measures and the expectation of a large US rate cut might cap the downside for Silver.
Silver Price (XAG/USD) attracts some sellers to near $31.55 during the early Asian session on Monday. The improved risk sentiment in global markets triggers some profit-taking in the white metal. Traders will keep an eye on US Federal Reserve (Fed) Chair Jerome Powell's speech later on Monday.
The upbeat mood could exert some selling pressure on the white metal as traders await the fresh catalysts. The Fed Chair Jerome Powell's speech might offer some hints about the US interest rate outlook for this year.
The People's Bank of China (PBoC) Governor Pan Gongsheng announced new stimulus measures to revive a flagging property sector and low domestic demand in the country. Also, the PBoC stated the central bank would reduce the amount of reserves banks are required to keep. “Silver is going to continue to rally over the coming quarters because of the consecutive rate cuts and as China’s stimulus could continue for some time,” said Amelia Xiao Fu, head of commodity markets at BOCI.
Additionally, hopes of another large US rate cut provide some support to the Silver price. According to the CME FedWatch Tool, Interest rate futures contracts have priced in a nearly 54% odds of a half-point cut in November, while the possibility of a quarter-point cut stands at 46%.
Meanwhile, Israel’s killing of Hezbollah leader Hassan Nasrallah has further fuelled geopolitical tensions in the Middle East and intensified the war at its border with Lebanon. The Iran-backed militant group says it will continue to fight, even as a growing number of senior Hezbollah figures have been killed, per CNN. The rising geopolitical tensions in the Middle East could boost XAG/USD.
Silver FAQs
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.
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.
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.
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.