Silver Price Forecast: XAG/USD falls to near $33.50 amid improved market sentiment

• Silver price attracts sellers as recent US data reinforces the odds of nominal rate cuts by the Fed.
• The US Dollar receives support as Treasury yields continue to gain ground.
• The downside of the Silver could be restrained due to political uncertainty around the US presidential election.

Silver price (XAG/USD) is under pressure as the US Dollar (USD) and Treasury yields continue to rally, driven by recent robust US economic data released on Friday. Silver price hovers around $33.50 per troy ounce during Monday’s European trading hours.

The dollar-denominated Silver faces challenges due to solid US Dollar (USD) amid higher Treasury yields. A higher US Dollar makes Silver expensive for buyers with foreign currency. The US Dollar Index (DXY), which measures the USD against six major currencies, trading near 104.30. Meanwhile, yields on 2-year and 10-year US Treasury bonds are at 4.12% and 4.28%, respectively.

Friday's data release showed the US Michigan Consumer Sentiment Index rose to 70.5 in October from 68.9, beating forecasts of 69.0. Additionally, Durable Goods Orders declined by 0.8% month-over-month in September, a smaller drop than the expected 1.0%.

Political uncertainty around the US presidential election may lend some support to Silver. In the past three weeks, allies of former President Donald Trump faced at least 10 legal setbacks in key battleground states, which could influence the November 5 race between Trump and his Democratic opponent, Vice President Kamala Harris.

The safe-haven appeal of Silver may be limited, however, by easing geopolitical tensions. Following Israel's airstrikes on Iranian missile and air defense sites early Saturday, which were less aggressive than expected, Iran has downplayed the impact. Supreme Leader Ayatollah Ali Khamenei remarked that the incident "should neither be downplayed nor exaggerated."

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

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