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29 Jan 2025
Silver Price Forecast: XAG/USD gains traction to near $30.50, Fed rate decision looms
- Silver price edges higher to around $30.40 in Wednesday’s Asian session.
- The Fed is anticipated to keep interest rates on hold on Wednesday.
- Safe-haven flows could support the Silver price.
The Silver price (XAG/USD) trades with mild gains around $30.40 during the Asian trading hours on Wednesday. The uncertainty surrounding new tariff policies under US President Donald Trump’s administration could provide some support to the precious metal. Later on Wednesday, all eyes will be on the Federal Reserve (Fed) meeting.
The Fed interest rate decision on Wednesday will play a pivotal role in shaping the direction of Silver price. The US central bank is expected to hold its benchmark rate steady at its January meeting at its current range of 4.25%–4.50%. In December Fed Chair Jerome Powell signaled that the Fed would deliver fewer rate cuts in 2025 than it had earlier projected
However, investors will closely watch the Press Conference for more cues about the US rate outlook. If the Fed takes a wait-and-see approach to the Trump administration's policies, this could lift the Greenback and weigh on the USD-denominated commodity price in the near term.
Additionally, China’s economic growth concerns could weigh on Silver demand as China is a major consumer of silver. China's manufacturing activity unexpectedly contracted in January, its weakest since August. The country’s Manufacturing Purchasing Managers' Index (PMI) contracted to 49.1 in January. This reading came in below the previous reading and market consensus of 50.1.
On the other hand, safe-haven demand amid the ongoing Russia and Ukraine conflicts could boost the white metal. Officials and media outlets reported on Wednesday that Ukrainian drones targeted oil and power facilities in western parts of Russia.
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.