Silver price retreats sharply after hitting record highs amid profit-taking

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Silver (XAG/USD) is retreating sharply and trades around $109.40 on Thursday at the time of writing, posting a 6.50% decline on the day, after reaching a fresh all-time high at $121.66.

Silver price corrects sharply after posting fresh all-time highs earlier on Thursday.
Geopolitical tensions continue to support safe-haven demand, but profit-taking dominates.
Uncertainty surrounding US monetary policy and the US Dollar keeps precious metals attractive.

Silver (XAG/USD) is retreating sharply and trades around $109.40 on Thursday at the time of writing, posting a 6.50% decline on the day, after reaching a fresh all-time high at $121.66. Following a strong rally driven by safe-haven demand, the Silver market is taking a breather as investors lock in profits amid heightened volatility.

Demand for precious metals remains underpinned by geopolitical tensions. US President Donald Trump has urged Iran to resume nuclear talks, warning that any future US strike would be far more severe. In response, Tehran has threatened retaliation against the United States (US), Israel and their allies, keeping uncertainty elevated and supporting safe-haven assets such as Silver.

According to Reuters, Marex analyst Edward Meir notes that rising US debt levels and the gradual fragmentation of the global trade system into regional blocs are encouraging investors to reduce exposure to a US-centric model and increase allocations to precious metals. This structural shift continues to support longer-term Silver demand despite short-term corrections.

Concerns over the independence of the US Federal Reserve (Fed) are also weighing on sentiment. The Trump administration is pursuing a criminal investigation into Fed Chair Jerome Powell and considering changes within the institution, increasing uncertainty around the future credibility of US monetary policy. Against this backdrop, the US Dollar (USD) struggles to regain sustained momentum, reinforcing Silver’s appeal as a hedge against currency risks.

On the macroeconomic front, the Fed keeps interest rates unchanged in the 3.50%-3.75% range while acknowledging that inflation remains elevated and economic uncertainty is still high. Recent labor market data point to ongoing resilience, but stabilizing unemployment and moderating job gains support a cautious stance from the central bank. According to Commerzbank, the Fed is in no rush to deliver further rate cuts unless economic indicators deteriorate meaningfully.

Overall, the current pullback in Silver prices appears largely driven by technical adjustments and profit-taking after an exceptional rally. Fundamentals, supported by geopolitical risks, political uncertainty in the United States and persistent US Dollar weakness, continue to argue in favor of sustained interest in Silver over the medium term.

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.