Peter Smith
XAG/USD gains momentum as silver prices rise above $28.50, driven by increasing industrial demand and geopolitical tensions.
XAG Market on Track for Record Highs
Silver price (XAG/USD) gains momentum near $28.50 on Thursday during the early European session. The upsurge of the white metal is bolstered by rising industrial demand and safe-haven flows amid the ongoing geopolitical tensions in the Middle East.
The Silver Institute released its annual World Silver Survey on Wednesday, projecting that industrial demand in the silver market is expected to reach another record high this year, climbing 9% to 710.9 million ounces. This surge is primarily attributed to XAG demand for Photovoltaic (PV) solar panels.
Geopolitical Factors Fueling Demand XAG
The ongoing tensions in the Middle East, particularly between Iran and Israel, are anticipated to further fuel the demand for silver. ANZ commodity analysts suggest that silver holds significant potential, despite encountering solid resistance at $29.90 last week.
Speculation surrounding the Federal Reserve (Fed) potentially delaying its easing cycle could cap the upside of XAG prices. Fed Cleveland President Loretta Mester remarked on Wednesday that inflation is higher than anticipated, indicating the need for more confidence in its trajectory. Fed Chair Jerome Powell echoed similar sentiments earlier this week, emphasizing the necessity of waiting for more evidence to gain confidence in inflation's trajectory before considering lowering borrowing costs.
Impact of US Interest Rates on XAG Demand
The narrative of higher US interest rates for an extended period may dampen demand for silver as it is considered a non-interest-bearing asset. The prospect of a higher-for-longer US rate environment contrasts with the attractiveness of silver as an investment.
In conclusion, XAG prices are experiencing an upsurge above $28.50 driven by increasing industrial demand and geopolitical tensions in the Middle East. However, speculation regarding the Federal Reserve's monetary policy and the impact of US interest rates on silver demand pose potential challenges to its upward trajectory.
Peter Smith
