Silver (XAG/USD) advances on Wednesday, trading around $83.80 at the time of writing, up 1.60% on the day. The precious metal is rebounding after a steep correction seen over the previous two days, during which prices fell sharply amid broad liquidation across precious metals.
Demand for safe-haven assets is strengthening as geopolitical tensions intensify in the Middle East. The war involving the United States (US), Israel and Iran has entered a new phase of military escalation, marked by airstrikes and missile attacks on several strategic sites. Tehran has responded with missile and drone strikes targeting US bases and allied facilities in the region, increasing uncertainty over the conflict’s trajectory.
In this context, markets are closely monitoring potential disruptions to energy shipments through the Strait of Hormuz, a critical maritime route for global Oil exports. The prospect of sustained higher energy prices is reviving global inflation concerns and reinforcing the appeal of traditional safe-haven assets such as Silver.
US President Donald Trump stated that the US Navy could escort commercial vessels in the Gulf to ensure the free flow of energy, adding that Washington could also provide political risk insurance for tankers operating in the region.
At the same time, investors are reassessing the monetary policy outlook of the Federal Reserve (Fed). Markets are currently pricing in around 50 basis points of interest rate cuts by the end of the year, according to estimates based on the CME FedWatch tool. Such an environment could support precious metals, which tend to benefit from lower interest rates.
However, the strengthening US Dollar (USD) may limit further gains in USD-denominated Silver. Rising energy prices are fueling inflation expectations, prompting some investors to reconsider the timing of potential monetary easing by the Fed.
On the macroeconomic front, the latest US data still point to a resilient economy. The ADP private employment report showed job growth of 63K in February, above market expectations, while the Institute for Supply Management (ISM) reported that the Services Purchasing Managers Index (PMI) rose to 56.1 in February from 53.8 in the previous month. These indicators suggest solid economic activity, which could support the US Dollar and moderate Silver’s upside momentum.
Silver FAQs
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.
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.
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.
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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