- Silver price gains traction around $29.45 in Thursday’s early European session, up 1.03% on the day.
- Further decline of the USD, ongoing Middle East tensions support the silver price.
- Investors await the second estimate of US Q2 GDP growth numbers on Thursday ahead of PCE inflation data.
Silver price (XAG/USD) edges higher to near $29.45 during the early European session on Thursday. The ongoing geopolitical tensions in the Middle East and weaker US Dollar (USD) amid the Federal Reserve (Fed) rate cut expectation provide some support to the white metal.
The anticipation that the Fed would start easing its monetary policy in September exerts some selling pressure on the Greenback and is underpinned by the USD-denominated Silver price as it makes Silver cheaper for most buyers. Futures markets have fully priced in a 25 basis points (bps) rate cut in September, while the odds of a deeper rate cut stand at 36.5%, according to the CME FedWatch Tool.
Furthermore, the Middle East tensions remain high, and market players will closely monitor the development surrounding Israel and Hezbollah conflicts. Any sign of escalation could boost the white metal.
On the other hand, the firmer USD might drag the white metal down. The release of the US Gross Domestic Product (GDP) Annualized on Thursday and the Personal Consumption Expenditures (PCE) Price Index on Friday could offer some hints about the US interest rate path. The US economy for the second quarter in the second estimate is estimated to grow 2.8%, while the Fed’s preferred gauge of inflation, Core PCE, is projected to rise from 2.6% to 2.7% YoY in July.
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.