Silver Price Forecast: XAG/USD Slumps Below $31 as Safe-Haven Demand Fades
Silver price (XAG/USD) extends its correction below $31.00 in European trading hours on Wednesday after facing selling pressure near $31.50 on Tuesday. The white metal falls back as fresh escalation in the Russia-Ukraine war inspired by President Vladimir Putin’s approval to lowering the threshold for counter attack by nuclear weapons faded after Russian Foreign Minister Sergei Lavrov said the country will "do everything possible" to avoid the onset of nuclear war.
Putin cleared revision in the nuclear doctrine after US President Joe Biden provided the Army Tactical Missile System (ATACMS) to Ukraine and permitted them to launch deep into Russian territory. Historically, demand for safe-haven assets such as Silver, strengthens in times of uncertainty and heightened geopolitical risks.
A sharp recovery in the US Treasury yields has also weighed on the Silver price. 10-year US Treasury yields jump to near 4.42% on expectations of fewer interest rate cuts from the Federal Reserve (Fed) in its current policy-easing cycle. Higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Silver. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, bounces back strongly above 106.60.
Market participants expect the economic agenda of President-elected Donald Trump will boost the United States (US) inflation and economic growth, a scenario that will force the Fed to follow a gradual rate-cut approach.
Source : FXStreet
