Silver Price Forecast: XAG/USD steadies around $69.00 amid US bond buybacks
- Silver could further climb as the US Treasury doubled buybacks above $4B to curb rising bond yields.
- Stricter US sanctions and an oil blockade on Iran threaten to push energy prices higher.
- Potential energy price spikes may limit future interest-rate cuts, posing headwinds for non-yielding Silver.
Silver price (XAG/USD) remains stronger for the fourth successive day, trading around $69.00 per troy ounce during the European hours on Monday. Silver price rises as concerns over United States (US) debt management and fiscal sustainability persist.
This market reaction follows the US Treasury Department's pledge to at least double its buybacks of longer-dated government debt to curb surging bond yields. US Treasury Secretary Scott Bessent indicated these buybacks could exceed $4 billion, signaling a strategic effort to demonstrate that elevated yields fail to accurately reflect underlying economic fundamentals.
However, non-yielding Silver could face potential headwinds if energy prices trend upward, which could limit the scope for upcoming interest-rate cuts. Secretary Bessent announced plans to impose unprecedentedly tough sanctions as part of an economic isolation campaign designed to force Iran and its trade partners into compliance. This policy shift threatens further constraints on global energy markets, especially as Iranian oil shipments experience severe disruptions and offers to Chinese buyers fall off amid an ongoing US naval blockade.
Tehran has dismissed the impending sanctions as an ineffective attempt to exert economic pressure, emphasizing decades of experience navigating blockades and building economic resilience. Meanwhile, geopolitical friction around the Strait of Hormuz remains acute, with vessel transit through the critical oil corridor staying well below historical averages.
Fed watchers eye Warsh’s Jackson Hole focus on AI and task forces
According to Deutsche Bank, their US economists have published a preview of Fed Chair Warsh’s upcoming Jackson Hole appearance, highlighting the potential for a more thematic address. They note that if Warsh opts for a “big-picture” speech, “then his options include a discussion of the Fed’s task forces he set up, or possibly a speech on AI’s impact on the economy and his thinking,” framing the event as a key opportunity for insight into his broader policy approach.
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.