Silver Price Forecast: XAG/USD slumps to near $34.00 on some profit-taking
- Silver price attracts some sellers to near $34.15 in Tuesday’s Asian session, down 1.70% on the day.
- US duties on imported steel and aluminum are set to double to 50% starting on Wednesday.
- The US May Nonfarm Payrolls will be closely watched later on Friday.
The Silver price (XAG/USD) faces some selling pressure to around $34.15 after retreating from a nearly seven-month high during the Asian trading hours on Tuesday. The white metal loses ground due to some profit-taking amid easing trade tensions.
A generally positive tone around the equity markets weighs on the safe-haven assets, including the white metal. US President Donald Trump planned to double import tariffs on steel and aluminum, starting on Wednesday. On the same day, the Trump administration asked its trade partners to submit their best offers in order to finalize deals before July 8. However, the potential downside for XAG/USD might be limited amid tariff and economic uncertainty.
The Greenback edges lower after data showed US manufacturing contracted for a third month in May. This, in turn, might help limit the USD-denominated commodity price’s losses. The US Manufacturing Purchasing Managers Index (PMI) declined to 48.5 in May versus 48.7 prior, the Institute for Supply Management (ISM) revealed on Monday. This figure came in below the market consensus of 49.5.
Traders will closely monitor the release of the US employment report for May later on Friday. This report could offer some hints about the US economy and interest rate path. The US Nonfarm Payrolls (NFP) is expected to show job growth of 130K in May, while the Unemployment Rate is projected to remain steady at 4.2% in the same report period. If the data shows a stronger-than-expected outcome, this could boost the Greenback and undermine the white metal.
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.