Silver Price Forecast: XAG/USD rises to near $34.00 amid geopolitical risks, looming US presidential election

• Silver price drifts higher to around $33.90 in Tuesday’s early European session, adding 0.71% on the day. 
• Growing fears of rising Middle East tensions, and uncertainties surrounding the US presidential election could support white metal. 
• Bets for smaller Fed rate cuts might cap the Silver’s upside. 

Silver price (XAG/USD) gains traction to near $33.90 during the early European session on Tuesday. The ongoing geopolitical tensions in the Middle East and the uncertainties surrounding the global economy and the US presidential election lift the white metal. 

Iran's Supreme Leader Ali Khamenei has given a measured response to Israeli strikes on the country, stating that the attack should not be "exaggerated or downplayed" but refraining from pledging quick retaliation. According to the BBC, Iran's President Masoud Pezeshkian said that the country will "respond appropriately" to an attack that killed at least four troops. 

Market players will monitor the development surrounding geopolitical risks in the region. Any signs of further escalation could boost the safe-haven flows, benefiting the silver price. 

Major central banks worldwide have largely begun easing monetary policy and cutting interest rates. Furthermore, the additional US Federal Reserve (Fed) rate cuts expected in the November meeting could support the non-yielding precious metal. 

However, bets for a less aggressive policy easing by the Fed could cap the upside for the Silver. Financial markets anticipate the US central bank to cut interest rates by 25 basis points (bps) in both the policy meetings in November and December.

Later this week, the advanced US Q3 Gross Domestic Product (GDP), the Personal Consumption Expenditures (PCE) Price Index for September and Nonfarm Payrolls (NFP) will be the highlights. These reports could offer some hints about the size and pace of US Fed rate reductions. 

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.