Silver (XAG/USD) Price Forecast: Hits $27.15 Amid Fed’s Hawkish Stance & Eased Tensions

Silver (XAG/USD) has been unable to stop its downward trend, hitting an intra-day low of 27.1585. However, the decline can be attributed to easing geopolitical tensions, which have reduced the demand for safe-haven assets like silver.

Silver Price Chart - Source: Tradingview

Furthermore, the losses in silver prices were further bolstered by the growing consensus that the Federal Reserve (Fed) will maintain higher interest rates for an extended period. This hawkish stance underpinned the US dollar and contributed to the losses in Silver price.

Easing Geopolitical Tensions and Safe-Haven Silver Price

As mentioned above, the subdued performance of silver prices can be linked to the easing of geopolitical tensions across various regions. Iran’s signal that it won’t retaliate against Israel’s recent missile strike has reduced tensions, contributing to the drop in silver prices.

This is why, Investors are less inclined to seek refuge in safe-haven assets such as silver as geopolitical uncertainties eased. However, the reduced demand for these assets exerts downward pressure on silver prices as market sentiment shifts toward riskier investments.

Impact of Federal Reserve’s Interest Rate Policy on Silver Price

Another factor undermined the silver prices is the growing acceptance that the Federal Reserve (Fed) will maintain higher interest rates for an extended period. This perception stems from the Fed’s commitment to addressing inflationary pressures in the economy by tightening its monetary policy.

When the Federal Reserve indicates that it plans to keep interest rates high, investors rethink their investment strategies, which affects the demand for silver. Higher interest rates make other types of investments more appealing compared to non-yielding assets like silver.

As a result, the anticipation of persistently high-interest rates puts downward pressure on silver prices, reducing their potential to increase. Generally, silver prices are facing mild bearish pressure due to a confluence of factors, including easing geopolitical tensions and expectations of the Federal Reserve keeping interest rates higher for longer.

Investors are closely monitoring these developments, which are likely to continue influencing the trajectory of silver prices in the near term. Silver prices have continued their downward trajectory, recording an intraday low of $27.1585.

This decline is largely attributed to diminished geopolitical tensions, notably following Iran’s indication of restraint in response to Israel’s recent missile strikes. The decreased likelihood of escalation has lessened the appeal of safe-haven assets like silver, steering investors towards riskier assets, which in turn exerts downward pressure on the XAG/USD price.

Hawkish Federal Reserve Policies Dampen Silver Appeal

Compounding the bearish sentiment on silver prices is the consensus expectation that the U.S. Federal Reserve will sustain elevated interest rates to combat inflation. This outlook strengthens the U.S. dollar, making dollar-denominated assets like silver less attractive.

Silver Price Chart

High interest rates enhance the yield on interest-bearing assets, diminishing the allure of non-yielding investments such as silver. As a result, the expectation of ongoing high rates is a significant drag on silver’s market price.

Market Outlook: Monitoring Economic Indicators and Policy Shifts

Overall, silver prices are experiencing downward pressure driven by a combination of easing geopolitical risks and the anticipation of continued high U.S. interest rates. Investors remain vigilant, closely watching global economic indicators and central bank policies, which will likely influence the future pricing dynamics of XAG/USD.

This cautious market sentiment suggests that any significant changes in the geopolitical landscape or monetary policy could swiftly alter the current trends affecting silver prices.

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Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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