Quick Summary
- Silver prices experienced a recovery during Asian trading hours, trading near $52.70 per troy ounce.
- The precious metal is seeing renewed interest due to increased safe-haven demand amid U.S. economic uncertainties and lingering inflation concerns.
- Potential U.S. tariffs on silver, coupled with its inclusion on a critical minerals list, are also contributing to supply-side support for its price.
- Hawkish remarks from Federal Reserve officials and higher interest rates are tempering expectations of a rate cut, potentially limiting silver’s upside.
Silver Price Recovers Amidst Economic Uncertainty
Silver price (XAG/USD) is showing signs of recovery, retracing recent losses and trading around $52.70 per troy ounce during Asian trading on Friday. This uptick is driven by a resurgence in safe-haven demand for precious metals, including silver, as concerns grow over the U.S. economic outlook.
đź’ˇ The uncertainty stems from a backlog of official economic data following the recent U.S. government reopening. Early private sector indicators for October suggest a cooling labor market, a dip in consumer confidence, and persistent inflation worries.
National Economic Council Director Kevin Hassett has noted that some October data might not fully materialize, as several government agencies were unable to collect information during the shutdown. This comes as U.S. President Donald Trump signed a government funding bill on Thursday, ending a record 43-day government shutdown.
Fed’s Cautious Stance May Limit Silver’s Gains
Despite the upward momentum, the upside potential for non-interest-bearing assets like silver could be constrained. Cautious statements from Federal Reserve officials have diminished the likelihood of a December rate cut.
⚡ Higher interest rates typically lead to increased yields on newly issued bonds, making them more attractive to investors seeking better returns. The CME FedWatch Tool currently indicates that markets are pricing in nearly a 50% chance of a 25-basis-point Fed rate cut in December, a decrease from 69% just a week prior.
Federal Reserve Bank of St. Louis President Alberto Musalem emphasized the need for caution, stating there is limited room to ease monetary policy without risking an overly accommodative stance. Additionally, Minneapolis Fed President Neel Kashkari pointed out that inflation remains elevated at 3%.
Supply-Side Risks Bolster Silver Prices
Supply-related risks are also providing support for silver’s price gains, fueled by concerns about potential U.S. tariffs on the metal.
đź“Ť Last week, the U.S. Department of the Interior added Silver, Copper, and metallurgical Coal to its critical minerals list. This designation highlights their importance for economic and national security, potentially paving the way for Section 232 investigations and trade measures, similar to those previously applied to copper.
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.
Final Thoughts
Silver prices are currently experiencing a rebound, driven by safe-haven demand amidst U.S. economic uncertainties and potential supply-side pressures from tariff concerns. However, the Federal Reserve’s cautious stance on interest rates may present headwinds for further significant gains in the near term.
