- Silver prices face challenges due to a reduced demand for safe-haven assets following Trump’s election victory.
- The demand for riskier assets improves as markets assess the potential impacts of the proposed Trump policies.
- The dollar-denominated Silver struggles due to a stronger US Dollar and rising Treasury yields.
Silver prices (XAG/USD) experiences a third consecutive day of declines, trading around $30.60 per troy ounce during the Asian session on Tuesday. The precious metals sector, including Silver, is facing pressure due to a reduced demand for safe-haven assets.
Traders are increasingly shifting toward riskier assets as markets assess the potential impacts of US President-Elect Trump’s potential fiscal policies and monetary strategies. The possibility of tariffs being implemented early in Trump’s presidency could lead to inflation, which in turn may cause the Federal Reserve (Fed) to delay its expected easing measures in the coming year.
As a result, the dollar-denominated Silver is also struggling amid a stronger Greenback and rising US Treasury yields. The US Dollar Index (DXY), which tracks the value of the US Dollar against six major currencies, is hovering near a four-month high at 105.70. Meanwhile, the yields on 2-year and 10-year US Treasury bonds are at 4.28% and 4.32%, respectively, at the time of writing.
China’s recent stimulus measures have fallen short of investor expectations, undermining earlier hopes for industrial support in the largest manufacturing hub and negatively impacting the outlook for industrial metals across the board. This has put additional pressure on Silver, which has significant usage in electrification, particularly in solar panels.
Last week, China announced a 10 trillion Yuan debt package aimed at easing local government financing pressures and boosting the economy. However, the package did not include direct economic stimulus measures, which many had hoped for.
Meanwhile, Chinese-owned solar panel manufacturers have begun scaling back production, partly due to concerns that Trump’s election victory in the US could lead to higher tariffs on the sector. Morgan Stanley has predicted that the Trump administration may impose immediate tariffs of 60% on imports from China.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD jumps to mid-0.6500s on weaker USD
AUD/USD touches a near two-week top during the Asian session on Monday as a sharp pullback in the US bond yields prompts some USD profit-taking. Moreover, the upbeat market mood supports the risk-sensitive Aussie amid the RBA's hawkish stance.
USD/JPY languishes below 154.00 on USD profit-taking
USD/JPY slides back closer to last week's swing low, below the 154.00 mark during the Asian session on Monday. Retreating US bond yields drags the USD away from a two-year top high and drives flows towards the lower-yielding JPY, though the BoJ uncertainty could limit losses for the currency pair.
Gold touches near three-week high on sliding US bond yields, USD weakness
Gold price builds on Friday's positive move beyond the $2,700 mark and climbs to a nearly three-week high on Monday. The USD pulls back from a two-year high on the back of retreating US bond yields and benefits the commodity.
Elections, inflation, and the bond market
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.