Silver bounces back despite continued uncertainty over US-Iran peace deal

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Silver price (XAG/USD) trades 1.85% higher to near $76.30 during the European trading session on Tuesday. The white metal gains as oil prices have corrected, while uncertainty surrounding the United States (US)-Iran remains intact.

Silver price recovers to near $76.30 despite uncertainty surrounding the US-Iran deal.
Lower Oil prices have offered support to Silver prices.
Investors await the US JOLTS Job Openings data for April.

As of writing, the WTI Oil price is down 1.8% to near $89.20. There has been an inverse relation between oil and Silver prices since the Middle East war started, as elevated energy prices have prompted US inflation and have forced traders to price out the possibility of the Federal Reserve’s (Fed) interest rate cuts this year.

Oil prices dropped following comments from US President Donald Trump on Monday, which signaled that he had forced Israel to stop attacking Iran-backed Hezbollah in Lebanon.

On Monday, several Iranian officials condemned Israel’s attacks on Lebanon and warned of severe consequences to both the US and Israel.

Meanwhile, the uncertainty over the US-Iran reaching a deal in the near term has heightened, following headlines from Iran's Tasnim News agency on Monday that Tehran’s negotiating team has stopped exchanging messages with the US through mediators in response to an escalation of war crimes in Lebanon.

On the economic data front, investors await the US JOLTS Job Openings data for April, which will be published at 14:00 GMT. The Bureau of Labor Statistics (BLS) is expected to show that employers posted 6.82 million fresh jobs, marginally lower than 6.866 million in March.

Investors will pay close attention to the US JOLTS Job Openings data to get fresh cues regarding the Fed’s monetary policy outlook.

Later this week, investors will focus on the US Nonfarm Payrolls (NFP) data for May, which will be released on Friday.

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.