Silver Price Forecast: Why is XAG/USD slipping towards $57.40 as oil prices hold broadly firm?

Silver slides towards $57.40 as elevated oil prices weigh on sentiment.
Oil prices remain supported by persistent tensions in the Middle East.
At its policy meeting later this month, the Fed is expected to leave interest rates unchanged.

Selling pressure weighs on Silver (XAG/USD) as elevated oil prices fuel concerns over higher global inflation. The white metal is trading near $57.40, down 1.1%, in Wednesday’s European session.

WTI Oil is trading marginally higher near $98.25 at the time of writing, remaining close to the five-week peak of $101.05 reached on Tuesday.

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

Energy supply risks continue to mount as Iran maintains attacks on oil ships and threatens Saudi Arabia’s oil infrastructure, sustaining a risk premium in oil prices.

Growing concerns over Middle East supply have pushed oil prices higher, according to analysts at Danske Bank. Traders, they say, are becoming increasingly cautious about "Red Sea shipping risks and threats to oil infrastructure in Saudi Arabia." The bank observes that prices "have gained more than 10% this month" as "intensifying hostilities involving Saudi Arabia and Iran-backed Houthi forces, as well as Russia and Ukraine's attacks on energy infrastructure raised supply risks further," lending further support to the market’s recent gains.

Expectations of an interest rate hike by the Federal Reserve (Fed) could strengthen further if inflationary pressures intensify. Such a scenario would lift yields on interest-bearing assets while reducing the appeal of non-yielding assets such as Silver.

For now, the CME FedWatch tool indicates that the Fed is expected to keep interest rates unchanged at its policy meeting later this month.

Can Silver Ease Its Bearish Bias Below the 20-Day EMA?

A bearish near-term bias persists on the daily chart, with XAG/USD trading at $57.25, below the 20-day exponential moving average (EMA) of $59.66. This dynamic overhead barrier continues to cap the metal, indicating that rallies may face difficulty while prices stay beneath the EMA. At 38.77, the Relative Strength Index (RSI) remains below the neutral 50 threshold, pointing to persistent bearish momentum rather than an extreme oversold condition.

The July 17 low of $54.77 provides the key support on the downside. For immediate downward pressure to ease, Silver would need a sustained move above its first resistance, the 20-day EMA at $59.66.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Silver: Frequently Asked Questions

What attracts investors to Silver?

Investors actively trade Silver, a precious metal with a long history as both a store of value and a medium of exchange. While it is less popular than Gold, traders may choose Silver for its intrinsic value, to diversify their investment portfolios or as a potential hedge when inflation is high. Exposure can be gained by purchasing physical Silver coins or bars, or through instruments such as Exchange Traded Funds that track its price in international markets.

What drives movements in Silver prices?

A broad range of influences can drive Silver prices. Its safe-haven status means geopolitical instability or concerns about a severe recession can lift prices, though the effect is generally smaller than for Gold. Lower interest rates also tend to support Silver because it offers no yield. Since the metal is priced in dollars (XAG/USD), movements in the US Dollar (USD) are another important influence: a stronger Dollar tends to restrain Silver prices, while a weaker Dollar is likely to push them higher. Investment demand, recycling rates and mining supply can also shape prices, with Silver far more abundant than Gold.

Why does industrial demand matter for Silver prices?

Among metals, Silver has one of the highest levels of electrical conductivity, exceeding both Copper and Gold. This makes it widely used in industry, especially in electronics and solar energy. Prices can rise when demand surges, while weaker demand tends to bring them down. Economic conditions in the US, China and India can also drive price fluctuations. Large industrial sectors in the US and, particularly, China consume Silver across a range of processes; in India, consumer demand for Silver jewellery is also an important influence on prices.

How closely does Silver track changes in Gold prices?

Given their similar safe-haven status, Silver generally tracks Gold’s price movements and typically advances when Gold rises. Their relative valuations 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 be viewed by some investors as a sign that Silver is undervalued or Gold is overvalued. Conversely, a low ratio might indicate that Gold is undervalued compared with Silver.