Near $50.50: XAG/USD falls to new 11-month lows | Silver Price Forecast

Persistent inflation and robust economic growth fuelled expectations of a Federal Reserve rate increase, weighing on Silver.
3.4% third-quarter GDP growth underscored US economic resilience, alongside higher September PCE inflation.
75% odds of a December rate increase were priced in by markets, while the Fed held rates steady ahead of the midterm elections.

$50.69 per troy ounce marked a fresh 11-month low for Silver (XAG/USD). The metal traded around that level during Friday’s European session, extending its decline for a third consecutive day. Persistent US inflation and resilient economic growth weighed on Silver by strengthening market expectations that the Federal Reserve could raise interest rates later this year.

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

September’s US PCE price index rose 0.5% month-on-month, the largest increase since March. The gain lifted annual inflation to 3.6%, highlighting continued price pressures. Core PCE inflation also increased, reaching 3.1% year-on-year.

3.4% annualised GDP growth in the third quarter provided further evidence of US economic strength. The expansion exceeded the market forecast of 3.2%, supported primarily by steady consumer spending and strong investment in AI-related sectors.

Against this economic backdrop, interest rates were left unchanged by the Federal Reserve on Wednesday, ahead of the forthcoming US midterm elections. Investors nonetheless continue to price in a high probability of further policy tightening.

Approximately 75% odds of a 25-basis-point rate increase in December are now priced in by traders, according to the CME FedWatch Tool. That represents a moderate decline from the 84.2% probability recorded a day earlier.

Silver and PGMs Underperform as Macro Pressures Weigh on Demand

Divergence across precious metals remains a feature of the post-FOMC market, according to TD Securities. The bank observes that "while gold remains fairly resilient post-FOMC, industrial precious metals are skewing to the downside, with silver and PGMs materially underperforming as macro headwinds and the prospect of tightening policy weigh on demand outlooks." As investors reassess demand under a potentially tighter policy regime, this relative weakness highlights mounting pressure on metals with greater industrial exposure compared with Gold.

Silver: Key Questions

What attracts investors to Silver?

Historically a store of value and a medium of exchange, Silver remains a widely traded precious metal among investors. It is less popular than Gold, but traders may choose it for portfolio diversification, its intrinsic value or its potential to hedge against high inflation. Physical investment takes the form of Silver coins or bars. Alternatively, investors can gain exposure through instruments such as exchange-traded funds that track Silver’s price on international markets.

What drives movements in Silver prices?

A broad range of influences can move Silver prices. Its safe-haven status means geopolitical instability or concerns over a deep recession can lift prices, though the effect is less pronounced than for Gold. Lower interest rates also tend to support Silver because it pays no yield. Since Silver is priced in US dollars (XAG/USD), the performance of the US Dollar (USD) is another key influence: a stronger Dollar tends to restrain prices, while a weaker Dollar is likely to lift them. Investment demand, mining supply and recycling rates can also affect prices, with Silver far more abundant than Gold.

What role does industrial demand play in Silver pricing?

With electrical conductivity among the highest of all metals, exceeding that of Copper and Gold, Silver has extensive industrial applications, notably in electronics and solar energy. A sharp rise in demand can push prices higher; weaker demand tends to depress them. Economic developments in the US, China and India can also drive price fluctuations. Large industrial sectors in the US and especially China use Silver in a range of processes. In India, consumer demand for Silver jewellery is also an important factor in determining prices.

How closely does Silver track Gold prices?

Gold’s price direction tends to guide Silver, with gains in Gold typically accompanied by a rise in Silver because both metals share safe-haven status. Their relative valuation may be assessed using the Gold/Silver ratio, which measures how many ounces of Silver equal the value of one ounce of Gold. A high ratio may, in some investors’ view, indicate that Silver is undervalued or Gold overvalued. Conversely, a low ratio might point to Gold being undervalued relative to Silver.