- Silver price receives support due to uncertainty over the tariff policy ahead of the Trump administration.
- The industrial demand for Silver strengthens due to a positive economic outlook in China, the world's largest consumer of metals.
- The upside of the dollar-denominated metal could be restrained due to the improved US Dollar.
Silver price (XAG/USD) extends its winning streak for the fifth consecutive day, trading around $30.10 per troy ounce during the Asian hours on Wednesday. Silver, a safe-haven asset, found some support amid uncertainty over the tariff policy ahead of Trump's inauguration. However, Trump dismissed a Washington Post report suggesting that his team was considering narrowing the scope of his tariff plan to target only specific critical imports.
Additionally, a positive economic outlook in China, the world's largest consumer of Silver, is strengthening demand for the metal. The People’s Bank of China (PBoC) is working with the State Planner to stimulate the country's economy. PBoC official Peng Lifeng announced that the central bank will support banks in expanding loans under the trade-in initiative.
However, the price of the dollar-denominated precious metal may struggle as an improved US Dollar (USD) makes it more expensive for buyers using foreign currencies, thereby dampening Silver demand. The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, holds its position above 108.50 at the time of writing. The Greenback strengthened as the 10-year yield on US Treasury bonds rose by over 1% in the previous session, currently standing at 4.68%.
This surge highlights the changing investor sentiment toward the Federal Reserve's (Fed) interest rate outlook following robust US economic data. The latest ISM services report suggested increased activity and rising prices in the United States (US), intensifying concerns about persistent inflation. This has further pressured Silver price, as higher interest rates tend to reduce demand for the non-yielding metal. Traders are now focusing on upcoming US jobs data, including the Nonfarm Payroll (NFP) report, as well as the latest FOMC Minutes, for further policy insights.
The US ISM Services PMI increased to 54.1 in November, up from 52.1, exceeding the market expectation of 53.3. The Prices Paid Index, which reflects inflation, rose significantly to 64.4 from 58.2, while the Employment Index dipped slightly to 51.4 from 51.5.
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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