Silver Price Forecast: XAG/USD hovers around $81.00 due to fading Fed rate cut bets
- Silver struggles as expectations for near-term Federal Reserve rate cuts fade amid rising inflation concerns.
- Fed is expected to keep its benchmark interest rate unchanged in the 3.50%–3.75% range on Wednesday.
- Grey metal found support as the US Dollar and Treasury yields softened amid declining oil prices.
Silver price (XAG/USD) remains subdued after registering modest gains in the previous session, trading around $80.80 per troy ounce during the early European hours on Tuesday. The non-yielding precious metals, including Silver, came under pressure as expectations for near-term Federal Reserve (Fed) rate cuts faded amid rising inflation concerns linked to the rising energy prices. The Middle East war is causing a surge in oil prices, which have heightened inflation fears, further diminishing prospects for near-term monetary easing.
Markets widely expect the US central bank to keep its benchmark interest rate unchanged in the 3.50%–3.75% range at Wednesday’s meeting, according to the CME FedWatch Tool. If the Fed holds rates steady, it would mark the second consecutive pause after the central bank’s previous easing cycle.
The Reserve Bank of Australia (RBA) raised the Official Cash Rate (OCR) to 4.10% from 3.85% at its March meeting on Tuesday, potentially becoming the first G10 central bank to resume tightening. Meanwhile, the Bank of Japan (BoJ) is widely expected to keep interest rates unchanged at 0.75% on Thursday.
Silver price received support as the US Dollar (USD) and Treasury yields eased on lower oil prices. Crude prices declined as several tankers safely navigated the Strait of Hormuz, while major economies are expected to release petroleum reserves to help offset potential supply disruptions.
US Treasury Secretary Scott Bessent said the United States is allowing Iran to continue shipping crude through the Strait of Hormuz, while President Donald Trump is seeking support from other countries to help safeguard commercial activity in the vital waterway.
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.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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