Silver Price Forecast: XAG/USD remains below $29.00 despite rising geopolitical tensions

• The downside of the safe-haven Silver price could be limited due to rising geopolitical tensions.

• Hamas rejected the terms for a hostage release-ceasefire deal discussed in Doha on Thursday and Friday.

• Ukraine initiated the largest invasion of Russia since World War II.

Silver price (XAG/USD) price holds minor losses, trading around $29.00 per troy ounce during Monday’s Asian session. However, the downside of the safe-haven Silver could be limited due to rising geopolitical tensions.

On Sunday, conflicting statements from Hamas and Israel dampened the chances of a breakthrough ceasefire deal. Hamas has issued a statement rejecting the terms for a hostage release-ceasefire deal discussed in Doha on Thursday and Friday. The group accuses Prime Minister Benjamin Netanyahu of introducing new obstacles into the negotiations, according to Reuters citing a local news agency Times of Israel.

Israeli Prime Minister Benjamin Netanyahu is scheduled to host US Secretary of State Antony Blinken on Monday. Following their meeting, Blinken will travel to Cairo, where negotiations on a deal are continuing. The US has announced plans to host a second meeting later in the week and aims to finalize the agreement by the end of the week.

Additionally, concerns about escalating tensions between Ukraine and Russia were heightened as Ukraine initiated the largest invasion of Russia since World War II. The ministry released a video showing General Valery Gerasimov, the commander of the Russian military operations, visiting a different combat zone in Ukraine. Gerasimov received reports from commanders and set "tasks for further actions," according to Reuters.

The prices of non-yielding Silver may advance further due to the likelihood of an interest rate cut by the Federal Reserve (Fed) starting in September increases. Last week's US economic data indicated that Retail Sales exceeded expectations, while both the Producer Price Index (PPI) and Consumer Price Index (CPI) suggested that inflation is easing.

Federal Reserve Bank of San Francisco President Mary Daly emphasized Sunday that the US central bank should take a gradual approach to reducing borrowing costs, according to the Financial Times. Additionally, Federal Reserve Bank of Chicago President Austan Goolsbee warned that central bank officials should be cautious about keeping a restrictive policy in place longer than necessary.

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.