Below $50.50: Silver Price Forecast as XAG/USD Retreats Amid US Attacks on Iran’s Qeshm Island

$48.87, an 11-month low, may be Silver’s next downside target. Covert US military strikes on Iran’s Qeshm Island have left the metal vulnerable.
The probability of a December Fed rate hike stands at 73%, as Middle East tensions and elevated energy prices keep inflation concerns alive.
Precious metals face additional selling pressure from technology share liquidations and uncertainty surrounding the US midterm elections.

Silver (XAG/USD) trades near $50.30 per troy ounce in Tuesday’s Asian session. The metal is retreating after a modest advance the previous day. Prices remain close to the 11-month low of $48.87 per ounce reached on October 30. Fears over oil supplies have intensified following a United States (US) attack on Iran’s Qeshm Island.

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

Monday’s raid forms part of a covert series of limited attacks on Iranian targets carried out by Washington in recent weeks, the Wall Street Journal reported, citing US officials. The operations follow US President Donald Trump’s recent efforts to play down the prospect of a full-scale resumption of war with Iran after Tuesday’s midterm elections.

Iran’s Islamic Revolutionary Guard Corps (IRGC) intercepted and shot down two US MQM-170 drones south of Qeshm Island in the Strait of Hormuz, according to Iranian state media outlet Press TV. It also reported the destruction of a 55th US MQ-9 drone east of the strategic waterway.

Persistent Middle East conflict has pushed energy costs higher and heightened inflation risks, subjecting precious metals, including Silver, to selling pressure throughout the year. Central banks have consequently retained a hawkish policy stance. The CME FedWatch Tool now indicates approximately a 73% probability that the US Federal Reserve will raise rates in December.

Widespread asset liquidations across global markets followed a broad sell-off in technology and artificial intelligence shares. Investors are also watching the US midterm elections. Elevated energy prices and inflation concerns have brought mounting political scrutiny of the Trump administration and the Republican Party.

US midterms: Democratic momentum draws market attention

Tuesday’s US midterm elections are moving into focus as political odds increasingly favour the Democratic Party, according to strategists at Brown Brothers Harriman. Their assessment that “Democrats are widely expected to win the House of Representatives,” alongside the view that “Senate control is much closer, but the tide favors the Democratic Party,” highlights expectations of a possible shift in Congress’s balance of power.

Silver: Key questions answered

Silver’s investment appeal

Investors trade Silver extensively as a precious metal with a long history as both a store of value and a means of exchange. Gold attracts greater interest, but Silver may appeal to traders seeking portfolio diversification, intrinsic value or a potential hedge against high inflation. Exposure can take the form of physical coins and bars or investment vehicles such as exchange-traded funds, which track Silver’s price in international markets.

Key drivers of Silver prices

A broad set of influences can drive Silver prices. Its safe-haven role means geopolitical unrest or concerns about a severe recession can lift prices, though the effect is usually weaker than for Gold. Lower interest rates generally support Silver because it pays no yield. The US Dollar (USD) is another key influence: Silver is quoted in dollars (XAG/USD), so a stronger Dollar tends to restrain prices, while a weaker Dollar is likely to lift them. Investment demand, mine supply and recycling rates also matter. Silver is far more abundant than Gold.

Industrial demand and Silver pricing

With electrical conductivity among the highest of all metals, exceeding both Copper and Gold, Silver has extensive industrial applications, notably in electronics and solar energy. Rising demand can push prices higher; falling demand generally has the opposite effect. Economic developments in the US, China and India can also drive price fluctuations. Large industrial sectors in the US and especially China use Silver across a range of processes. In India, consumer demand for Silver jewellery is also an important influence on prices.

Gold’s influence on Silver prices

Gold’s price movements generally set the direction for Silver. A rise in Gold typically brings a corresponding increase in Silver, reflecting their similar safe-haven status. Relative valuations can be assessed using the Gold/Silver ratio, which measures how many ounces of Silver equal the value of one ounce of Gold. Some investors interpret a high ratio as a sign that Silver is undervalued or Gold overvalued. A low ratio, by contrast, may indicate that Gold is undervalued compared with Silver.