Silver price climbs amid risk-off sentiment, Fed rate cut expectations
- Silver price rises sharply, supported by a renewed risk-off mood across global markets.
- Political uncertainty in the United States and rising trade tensions boost demand for precious metals.
- Expectations of interest rate cuts by the Fed enhance the appeal of non-yielding assets such as Silver.
Silver (XAG/USD) trades around 112.50 on Tuesday at the time of writing, up 3.80% on the day, extending its four-day bullish momentum after erasing recent losses. The white metal benefits from a macroeconomic backdrop marked by rising political and geopolitical risks, prompting investors to rotate toward safe-haven assets.
The prospect of a partial shutdown of the US government is fueling uncertainty after Senate Democratic leader Chuck Schumer announced his opposition to a funding package that includes appropriations for the Department of Homeland Security. As the deadline to avert a government shutdown approaches, markets are reducing risk exposure, directly supporting demand for Silver.
At the same time, the monetary policy environment remains favorable for precious metals. Investors remain cautious ahead of upcoming decisions by the Federal Reserve (Fed), while speculation continues that monetary easing could accelerate later in the year. Expectations of interest rate cuts weigh on the US Dollar (USD) and strengthen the appeal of non-yielding assets such as Silver in an environment where real rates are expected to stay low.
Trade tensions are also contributing to market support. US President Donald Trump recently warned that tariffs on South Korean imports could be raised to 25% from the current 15%, citing delays in the approval of a trade agreement. He also threatened to impose 100% tariffs on Canadian goods if Ottawa were to pursue a trade deal with Beijing. These statements reinforce fears of escalating protectionism and sustain demand for safe-haven assets.
Silver also benefits from a broader reallocation toward real assets. A pullback in sovereign Bonds and certain currencies, against the backdrop of heavy fiscal spending and elevated public debt in major economies, is fueling what some investors describe as a debasement trade.
In this environment, Silver maintains a fundamentally bullish bias, supported by the combination of political risks, monetary uncertainty, and persistent geopolitical tensions.
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.
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