Silver gains momentum on geopolitical tensions, weaker US Dollar

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Silver (XAG/USD) trades around $85.40 on Monday at the time of writing, up 7.00% on the day. Silver is holding onto most of its gains and is moving closer to its all-time high of $58.87 set on December 28, against a backdrop of heightened risk aversion and a strong shift toward safe-haven assets.

Silver posts a sharp advance, registering solid gains at the start of the week.
Demand for precious metals rises amid escalating geopolitical and political risks.
Concerns surrounding US monetary policy weaken the USD and support non-yielding metals.

Silver’s bullish momentum is part of a broader move across the precious metals complex, also reflected in Gold (XAU/USD). Rising geopolitical tensions are driving flows into defensive assets, as investors closely monitor developments in the Middle East, particularly ongoing unrest in Iran and the exchange of threats between Tehran and Washington. These concerns are compounded by growing uncertainty over Arctic security, following discussions in Europe about strengthening the military presence in Greenland, further weighing on global risk sentiment.

The environment of uncertainty is exacerbated by an unprecedented political situation in the United States (US). The launch of a criminal investigation targeting Federal Reserve (Fed) Chair Jerome Powell has undermined confidence in the institution and raised fears of a politicization of monetary policy. This political pressure weakens trust in the central bank’s decision-making framework and weighs on the US Dollar (USD), a factor that typically supports Dollar-denominated precious metals such as Silver.

On the macroeconomic front, the latest US labor market data reinforce expectations of monetary easing. Job creation came in below market expectations, pointing to a gradual slowdown in employment conditions. In this context, markets continue to price in two interest-rate cuts by the Fed this year, even as a policy hold is widely expected at the next meeting in January. The prospect of lower interest rates reduces the opportunity cost of holding non-yielding assets, structurally supporting demand for Silver.

In the near term, investors’ focus turns to upcoming US economic releases, particularly the Consumer Price Index (CPI), Retail Sales, and the Producer Price Index (PPI), as well as speeches from Fed officials. Any confirmation of an economic slowdown or a more dovish stance from the central bank could extend Silver’s upside momentum, already fueled by an especially tense geopolitical and political backdrop.

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.