Silver Price Forecast: XAG/USD recovers to near 56.50 amid weakness in USD, bond yields
- Silver price rebounds to near $56.60 as the US Dollar and US Treasury Yields come under pressure.
- Hot US CPI report for September fails to lift hawkish Fed expectations.
- Investors await the US PPI data for September releasing at 12:30 GMT.
Silver price (XAG/USD) is up 1.5% to near $56.50 during the European trading session on Thursday. The white metal holds ground near $55.40 as the US Dollar (USD) and United States (US) Treasury Yields are under pressure, with financial markets remaining confident that the Federal Reserve (Fed) will hold interest rates steady in the policy meeting later this month.
In the European trade, the US Dollar Index (DXY), which tracks gauges the Greenback’s value against six major currencies, is down 0.4% to near 102.10 even after recovering some of its early losses. Technically, a lower US Dollar makes the Silver price a favorable risk-reward bet for investors.
10-year US Treasury Yields have slid to near 5.09%, the lowest level seen in three weeks. Theoretically, a decline in US bond yields results in an improvement in the appeal of non-yielding assets, such as Silver.
Why Fed prospects for October matters now?
On Wednesday, the US Consumer Price Index (CPI) report for September showed that price pressures grew at a faster-than-expected pace; however, they failed to uplift hawkish Fed expectations for the October meeting.
The CME FedWatch tool shows that the odds of the Fed hiking interest rates in the policy meeting later this meeting have increased marginally to 27% from 22% seen before the data release.
Hawkish Fed prospects for the October meeting were already lower as several policymakers had indicated no urgency for interest rate hikes. However, financial markets were awaiting the US inflation report, assuming that it might influence interest rate expectations.
US PPI data in focus
Meanwhile, investors shift their focus to the US Producer Price Index (PPI) data for September, which will be published at 12:30 GMT. The US PPI will likely show that the headline inflation at the producer level dropped to 5.3% YoY from the previous reading of 5.4%.
Silver Technical Analysis
In the daily chart, XAG/USD trades at $56.63, maintaining a bearish near-term bias as price holds firmly below the 20-period Exponential Moving Average (EMA) at $60.73. The EMA’s position overhead suggests that recent rebounds are being capped by prevailing supply, while the Relative Strength Index (14) at 34.75 hovers just above oversold territory, hinting that downside momentum is still dominant but starting to look stretched.
On the topside, the 20-day EMA at $60.73 is the immediate resistance to beat before any more meaningful recovery can develop. On the downside, the July 17 low at $54.77 appears to be the crucial support level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.