Silver Price Forecast: XAG/USD hits record highs near $69.00 on renewed Israel-Iran tensions
- Silver price jumps higher on renewed tensions between Israel and Iran.
- Israel raised concerns over Iran’s reconstituting its nuclear facilities.
- The Fed is unlikely to cut interest rates in the January policy meeting.
Silver price (XAG/USD) trades 2.5% higher to near $69.00 during the Asian trading session on Monday, the highest level ever seen. The white metal strengthens as investors shift to a safe-haven fleet on renewed tensions between Israel and Iran.
According to a report from NBC News, Israeli officials have grown increasingly concerned that Iran is expanding production of its ballistic missile program and reconstituting its nuclear facilities, which were damaged by Israeli military strikes earlier this year, and are preparing to brief United States (US) President Donald Trump about options for attacking it again.
The scenario of geopolitical tensions increases demand for safe-haven assets, such as Silver.
On the Federal Reserve’s (Fed) monetary policy front, investors remain confident that the central bank will not reduce interest rates in the January policy meeting. Fed dovish expectations for the January meeting have not accelerated, despite the release of the soft US inflation data for November.
On Thursday, the US Consumer Price Index (CPI) data for November showed that the headline inflation cooled down to 2.7% year-on-year (YoY) from 3% in October. Economists expected the inflation data to come in higher at 3.1%. The so-called core reading, which strips out volatile food and energy items, dropped to 2.6% from estimates and the prior reading of 3%.
Silver technical analysis
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.