XAG/USD appreciates above $34.00 on US political uncertainty and geopolitical fears

Silver prices bounce up on higher demand for safe assets as the US elections approach.
China asks the US to change its language on Taiwan sparking geopolitical concerns.
XAG/USD immediate bias turns positive with bulls aiming for $3425 ahead of $34.85.

Silver Prices’ (XAG/USD) resumed their upside trend on Tuesday, with precious metals heading north favoured by political uncertainty as US elections approach, and growing geopolitical tensions.

The outcome of the US election remains uncertain, with the candidates tied in only days away from the voting. This keeps risk appetite subdued and supports precious metals on their safe-haven status.

Beyond that, the Chinese President, Xi Jinping has asked Joe Biden to change the US’s language on the issue of Taiwan’s independence. A new episode of the rift between the two superpowers provides additional support to the white metal.

The immediate bias has turned positive, with the 4-hour RSI moving above 50. The pair might find some resistance at $34.25, ahead of the big target, of $34.85. Supports are $33.15 and $32.40.

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.

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