Silver Price Forecast: XAG/USD Climbs Towards $53.00 as US Dollar Weakens Amid Election Shift

• Oil prices fell as Democratic election wins fuelled hopes for peace with Iran, strengthening Silver’s appeal.
• Robust private-sector hiring underpinned rate-rise expectations, although cheaper energy could moderate inflation in the near term.
• To assess the Fed’s next policy step, investors are awaiting Initial Jobless Claims figures and the Nonfarm Payrolls report.

At around $53.10 per troy ounce in Thursday’s Asian trading session, Silver (XAG/USD) is advancing for a second consecutive day. The metal’s gains came as Democratic wins in the US midterm elections encouraged hopes that the US-Iran conflict could end, prompting a steep fall in oil prices.

A softer US Dollar (USD) and declining Treasury yields provided further support for the dollar-denominated, non-yielding white metal, increasing its attraction for investors. Acknowledging that the war had cost Republicans the election, President Donald Trump identified high petrol prices as a major reason for the defeat. He also indicated that he had no immediate plans to intensify attacks on Iran.

With oil prices lower, inflationary pressures could ease, reducing concerns over possible interest rate rises in the near term. Nevertheless, resilient domestic economic figures continued to bolster expectations that the Federal Reserve would raise rates. According to the ADP employment report, private-sector hiring increased by 86,000 in October, exceeding the 69,000 forecast, while September’s reading was revised down from 90,000 to 86,000. The ISM Services PMI, by contrast, edged down from 54.9 to 54.5. Although just below expectations of 54.8, it remained firmly in expansionary territory.

Markets are pricing in nearly an 82% probability of a further rate rise in December, according to the CME FedWatch Tool, as these robust US indicators sustain hawkish expectations for Federal Reserve (Fed) monetary policy. Attention now shifts to the forthcoming data releases: weekly US Initial Jobless Claims on Thursday, followed by Friday’s Nonfarm Payrolls report.

DXY remains above estimated fair value after post-election Dollar retreat

Despite the US Dollar’s retreat following the election, Scotiabank analysts maintain that the broader DXY index is expensive relative to their valuation framework. They “continue to highlight the DXY’s premium to our FV estimate based on 2Y spreads, which is closer to 100 (vs. spot in the mid-101s),” reinforcing their assessment that the Dollar remains above fair value despite its recent weakness across G10 FX.