Silver rebounds above $60 as softer US data, Warsh remarks weigh on the US Dollar

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Silver (XAG/USD) rebounds on Wednesday and trades around $60.35, up 3.19% at the time of writing. The white metal is supported by a weaker US Dollar (USD) following softer-than-expected US economic data and comments from Federal Reserve (Fed) Chair Kevin Warsh.

Silver rises more than 3% as weaker-than-expected US data and a softer US Dollar support precious metals.
Kevin Warsh's remarks reinforce expectations of a cautious Fed approach ahead of key US labor market data.
Investors now turn their attention to Thursday's US NFP report for further clues on the Fed's policy outlook.

Speaking at the European Central Bank (ECB) Forum in Sintra, Warsh said the Fed would not provide forward guidance and would adopt a new approach to make better policy decisions. He also noted that inflation risks have eased, putting pressure on the Greenback and supporting precious metals.

On the macroeconomic front, the ADP Employment Change report showed that US private payrolls increased by 98K in June, below market expectations of 113K and following a gain of 122K in May. Meanwhile, the Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) declined to 53.3 in June from 54 previously, also missing market expectations.

Markets are now focused on Thursday's Nonfarm Payrolls (NFP) report, which could provide fresh guidance on the Federal Reserve's next monetary policy decisions.

Despite Wednesday's rebound, interest rate expectations remain a key driver for precious metals. Investors continue to price in a restrictive monetary policy stance, with the possibility of a rate hike later this year. Higher interest rates increase the opportunity cost of holding non-yielding assets such as Silver, limiting the metal's upside potential over the medium term.

On the geopolitical front, progress toward a final US-Iran peace agreement remains slow. Although US and Iranian officials are in Doha, no direct talks are currently scheduled, maintaining some safe-haven demand for precious metals.

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.