Silver rises sharply on safe-haven demand amid trade, geopolitical risks

ARTICOLI POPOLARI

Silver (XAG/USD) accelerates on Wednesday and trades around $90.70 at the time of writing, up 3.90% on the day. The white metal benefits from an environment marked by rising trade and geopolitical uncertainties, which revives demand for safe-haven assets.

Silver jumps nearly 4% and trades around $90.70 on Wednesday, supported by renewed safe-haven flows.
Markets remain cautious ahead of US-Iran nuclear talks, amid lingering trade uncertainties.
Expectations of Federal Reserve rate cuts cap the US Dollar and underpin precious metals.

The recent announcement by US President Donald Trump of a 10% tariff increase on imports from all trading partners continues to fuel investor nervousness. This decision comes amid legal uncertainty following the Supreme Court’s ruling regarding the use of the International Emergency Economic Powers Act, reinforcing concerns about a protectionist escalation that could weigh on global growth.

At the same time, markets remain focused on the nuclear talks scheduled for Thursday in Geneva between the United States (US) and Iran. The US president stated that he prefers a diplomatic solution, while Iranian officials indicated they are ready to take the necessary steps to reach an agreement. However, the risk of failed negotiations and a potential military escalation in the Middle East maintains a geopolitical risk premium that favors precious metals.

On the monetary front, investors are reassessing the Federal Reserve's (Fed) rate path. Several central bank officials recently highlighted persistent inflationary pressures, calling for caution before embarking on a pronounced easing cycle. Nevertheless, markets continue to price in rate cuts in the coming months, which limits the US Dollar (USD) rebound potential.

In this context, the relative weakness of the Greenback and softer US bond yields support the appeal of Silver, a non-yielding asset that tends to benefit from a lower interest rate environment. In the absence of major US macroeconomic releases, short-term price action in the precious metal is likely to remain driven by developments on the trade front, signals from the Fed and the outcome of the Washington-Tehran talks.

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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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