The record price surge at the beginning of the year deprived silver of an important driver—demand for physical metal. Consumers are looking for alternatives, and the XAG/USD‘s dependence on gold is rising sharply. At the same time, the decline is happening much faster. Let’s discuss these topics and develop a trading plan.
The article covers the following subjects:
Major Takeaways
- Silver has lost half its value.
- The physical market is not supporting the XAG/USD.
- The Fed’s hawkish shift has dealt a blow to precious metals.
- Positions on the XAG/USD can be opened based on Warsh’s comments.
Monthly Fundamental Forecast for Silver
Some traders tend to pick highly volatile assets. In this regard, the choice in favor of silver is obvious. It not only rises more rapidly than gold but also plummets when everyone is selling precious metals. From the record highs reached in January, the XAU/USD has sagged by 28%, while the XAGUSD has collapsed by 52%. At the same time, the ratio between the two assets has risen to its highest level since the end of 2025.
Silver’s greater share of industrial use makes it more vulnerable to price increases. Commodity markets are cyclical: the higher an asset’s price rises, the more demand shrinks. Eventually, prices decline. Consumers are seeking alternatives to silver in key industries, including jewelry and solar panel manufacturing. As a result, XAG/USD bulls are losing crucial support from the physical market and are forced to focus on the macroeconomic backdrop. For the precious metals sector, this backdrop leaves much to be desired.
Gold and Silver Prices
Source: Bloomberg.
Silver typically tracks gold, and its higher volatility is due to the market’s smaller size. Speculative demand was a key driver of the XAU/USD rally to record highs in January. Investors were buying the precious metal simply because its price was rising. In this regard, gold resembled Bitcoin in its better years. At the same time, capital outflows from the cryptocurrency market fueled the upward trend and contributed to an influx of money into ETFs. As soon as the bubble burst, even good news failed to support XAU/USD quotes.
On the contrary, a series of negative news reports pushed gold below the psychologically important $4,000 level amid the Fed’s hawkish shift. Silver is also falling along with it. New Fed Chair Kevin Warsh’s emphasis on bringing inflation back to target has boosted the US dollar and pushed Treasury yields to more than one-year highs.
Gold received some support from the declining odds of a Fed rate hike. The futures market reduced the odds of a September rate hike from over 70% to 62% over the course of the week. The probability of two acts of monetary tightening fell from 50% to 38%. However, these developments led only to short-term stabilization of XAU/USD and XAG/USD quotes. Precious metals are more sensitive to the prospect of the Fed keeping borrowing costs elevated for an extended period.
Monthly Trading Plan for XAG/USD
Key events for the XAG/USD market will be the release of US labor market data for June and Kevin Warsh’s speech in Sintra, Portugal. Strong employment data and hawkish rhetoric from the new Fed chair will likely drive silver to $50.5 and $40, intensifying selling pressure. Conversely, if the Fed chair surprises with a dovish speech and nonfarm payrolls disappoint, the precious metal will surge toward $68 and $75.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of XAGUSD in real time mode
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