Silver price (XAG/USD) extends its gains for the third successive session, trading around $87.60 per troy ounce during the Asian hours on Tuesday. The grey metal advanced as Oil prices trimmed their gains after US President Donald Trump said he plans to waive oil-related sanctions and predicted the war with Iran would be resolved “very soon,” as he faces mounting economic and political pressures following days of sharp volatility in Oil markets.
A surge in energy markets had earlier pushed crude prices above $100 per barrel, heightening concerns about accelerating inflation and reinforcing expectations that major central banks, particularly the Federal Reserve (Fed), may need to adopt a more hawkish stance to curb price pressures. Meanwhile, investors are awaiting key US inflation reports, including the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) Price Index, due later this week for fresh clues on the Fed’s monetary policy outlook.
Higher interest rates raise the opportunity cost of holding non-yielding assets such as Silver, which tends to weigh on metal prices. In addition, a stronger US Dollar (USD) and rising bond yields added further pressure on the grey metal.
However, safe-haven demand offered some support to the grey metal as traders continued to assess geopolitical tensions involving the United States, Israel, and Iran, along with their potential economic implications. Still, the upside in Silver prices may remain limited amid concerns that elevated energy costs could slow global economic growth and dampen industrial demand, a key pillar of Silver consumption.
Silver FAQs
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.
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.
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.
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.