Silver price (XAG/USD) attracts some buyers to near $52.60 during the early Asian session on Tuesday. The white metal has reached a fresh all-time high, surpassing its previous peak from 1980, as a historic short squeeze in London intensified.
The rally in Silver price is bolstered by concerns over a depleting silver inventory in London, which drove prices to a premium over those seen in New York and prompted traders to ship metals across the Atlantic for a profit.
Additionally, global trade uncertainties have fueled safe-haven demand, supporting the precious metal. US President Donald Trump on Friday threatened an additional 100% tariff on Chinese goods from November 1 in retaliation for new export controls Beijing is planning for valuable rare earth minerals.
Dovish remarks from the Federal Reserve (Fed) officials also lift the Silver price. Philadelphia Fed new President Anna Paulson said on Monday that rising risks to the job market argue for more interest rate cuts by the US central bank, as trade tariffs now appear unlikely to push up inflation as much as expected. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding precious metal.
On the other hand, renewed US Dollar (USD) demand and improved risk sentiment could weigh on the USD-denominated commodity price in the near term. Trump changed his rhetoric on China on Sunday, saying that China’s economy “will be fine” and that the US wants to “help China, not hurt it.”
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.