Near $53.00: XAG/USD Climbs as Cheaper Oil Eases Inflation Pressure | Silver Price Forecast

Falling oil prices support Silver after Trump plays down the prospect of near-term military action against Iran.
A 78%+ probability of a December rate hike, shown by CME FedWatch, weighs on non-yielding XAG.
October Nonfarm Payrolls of 165K and a lower unemployment rate of 4.1% could strengthen the Greenback and limit Silver's advance.

Silver (XAG/USD) trades near $53.00 per troy ounce. The metal is recovering during Monday's Asian session after two days of declines, supported by easing inflationary pressures as oil prices fall.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

US President Donald Trump's comments sent crude prices lower. He described further military strikes on Iran as "highly unlikely," as long as progress on Iran's nuclear programme continues and the Strait of Hormuz stays open. Trump also said the unpopular Middle East conflict had contributed to the Republicans' recent midterm election defeats by driving energy costs higher.

According to Reuters, Trump reiterated in a telephone interview with CNN that further military action would probably not be needed if Iran signs a firm agreement. No large-scale US military operations have taken place, despite earlier suggestions that major attacks could resume after the midterms. Iran, meanwhile, has threatened to respond to any future strikes by attacking US and Israeli assets.

Above 78% is now the probability of another 25-basis-point rate increase at December's Federal Open Market Committee (FOMC) meeting, according to the CME FedWatch tool. Expectations that the Federal Reserve (Fed) will raise rates in December could, however, create headwinds for non-yielding Silver.

October's US Nonfarm Payrolls (NFP) rose by 165,000. That comfortably exceeded the 65,000 market consensus and followed September's revised figure of 60,000. The Unemployment Rate slipped to 4.1%, below the expected 4.2%. These strong employment readings are giving the Greenback substantial support. For further indications of the Fed's next policy decisions, traders are focusing on Tuesday's US Consumer Price Index (CPI) report and Friday's Producer Price Index (PPI).

Three US events to test Dollar repricing: data and Fed speakers in focus

The US calendar provides the next test of the recent change in Fed expectations and the accompanying Dollar weakness, according to ABN Amro strategists. They note that “three US events will test the repricing of Fed expectations and the USD’s downside risks today.” In their view, scheduled economic releases and Fed communications will be crucial in assessing whether markets have cut tightening expectations too sharply and priced in excessive further USD weakness.

Silver: frequently asked questions

What attracts investors to Silver?

Historically a store of value and a means of exchange, Silver remains a heavily traded precious metal. It is less popular than Gold, but traders may choose it for its intrinsic value, to diversify a portfolio or as a potential hedge against high inflation. Investors can hold physical Silver as coins or bars. Alternatively, they can gain exposure through instruments such as exchange-traded funds that track its price in international markets.

What drives movements in Silver prices?

A broad set of influences can move Silver prices. Its safe-haven role means geopolitical unrest or concerns over a severe recession can lift prices, though generally less than Gold's. Lower interest rates also tend to support Silver because it pays no yield. Since the metal is quoted in US dollars (XAG/USD), the performance of the US Dollar (USD) matters: a stronger Dollar typically restrains prices, while a weaker one is likely to lift them. Investment demand, recycling rates and mining supply also affect pricing, with Silver much more abundant than Gold.

What role does industrial demand play in Silver pricing?

With electrical conductivity among the highest of any metal, exceeding both Copper and Gold, Silver has extensive industrial uses, notably in electronics and solar energy. Rising demand can push its price higher; falling demand tends to have the opposite effect. Economic developments in the US, China and India can also drive price fluctuations. Large industrial sectors in the US and, especially, China use Silver across numerous processes. In India, consumer demand for Silver jewellery is another important influence on prices.

How closely does Silver follow Gold prices?

Gold's price direction often sets the pattern for Silver. A rise in Gold typically brings a similar move in Silver, reflecting their comparable safe-haven status. Investors may use the Gold/Silver ratio to assess the metals' relative valuations. It measures how many ounces of Silver equal the value of one ounce of Gold. A high ratio may be viewed by some investors as a sign that Silver is undervalued or Gold overvalued. A low ratio, by contrast, may indicate that Gold is undervalued against Silver.