Silver rallies on safe-haven demand amid US-China tensions, Fed rate cut bets

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Silver (XAG/USD) resumes its rally on Wednesday, trading around $52.40 per troy ounce at the time of writing, up 2.40% on the day, as investors seek safety amid renewed global tensions and growing expectations of additional monetary easing by the US Federal Reserve (Fed).

Silver resumes an upward march on Wednesday after the previous day's correction.
Escalating US-China trade tensions and expectations of further Fed rate cuts boost safe-haven appetite.
Weak US Dollar and prolonged government shutdown add to the bullish momentum in precious metals.

The precious metal remains buoyed by the deepening US-China trade conflict after US President Donald Trump threatened to terminate select trade ties with Beijing, accusing China of “economic hostility.” The announcement has reignited fears of a broader economic fallout, with the International Monetary Fund (IMF) warning that prolonged tariff uncertainty could weigh on global growth and trade flows.

Meanwhile, the ongoing US government shutdown, now in its third week, adds another layer of uncertainty, reinforcing safe-haven demand for both Silver and Gold. The absence of key economic releases such as the Consumer Price Index (CPI) and Nonfarm Payrolls (NFP) deprives markets of crucial data to gauge the health of the US economy, fueling speculation that the Fed will continue easing its policy stance.

Fed Chair Jerome Powell recently acknowledged that the US labor market has “softened considerably” and that there are “significant downside risks” to employment. According to the CME FedWatch tool, markets are pricing in a 97% chance of a 25-basis-point (bps) rate cut in October and another in December. These expectations have pushed the US Dollar (USD) lower, further supporting non-yielding assets like Silver.

Adding to the geopolitical risk premium, reports of potential new US military aid to Ukraine and retaliatory rhetoric from Russia keep global sentiment fragile. In this context, Silver remains a hedge against both geopolitical instability and potential monetary debasement.

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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