Silver Price Forecast: XAG/USD falls below $87.50 ahead of Trump-Xi meeting
- Silver has reversed its intraday gains, snapping a six-day rally.
- US and China are considering a trade framework to lower tariffs on $30 billion in goods, aiming to stabilize relations.
- India hiked import tariffs on Gold and Silver from 6% to 15% to stabilize the Rupee and conserve forex.
Silver price (XAG/USD) loses its daily gains and halts its six-day winning streak, trading around $87.30 per troy ounce during the Asian hours on Thursday. Traders await the meeting between US President Donald Trump and Chinese President Xi Jinping in Beijing. Traders also await the US Retail Sales report for April due later in the day.
US and China, the world’s two largest economies, may attempt to stabilize their relationship, reportedly considering a framework to reduce tariffs on roughly $30 billion worth of goods, excluding those tied to national security. However, geopolitical tensions remain a major factor. The summit is taking place against the backdrop of the war in Iran. Washington has recently increased pressure on Tehran by imposing new sanctions on entities involved in selling Iranian oil to China and threatening banks that facilitate those transactions.
Moreover, Silver prices could face further challenges as India decided to hike import tariffs on Gold and Silver from 6% to 15%, a move combining a 10% Basic Customs Duty with a 5% infrastructure cess to support the Indian Rupee. However, Silver demand may continue to elevate amid strong industrial demand for solar panels, electronics, and automotive manufacturing.
However, Silver also depreciates on shifting Federal Reserve (Fed) expectations. Following hotter-than-expected producer and consumer inflation data, investors are increasingly pricing out the possibility of US rate cuts this year, which typically pressures non-yielding assets like silver.
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.