- Silver price faces challenges as potential for trade deals dampens safe-haven demand.
- The European Union and the United States are nearing an agreement to implement 15% US tariffs on EU goods.
- Safe-haven demand for Silver may also weaken as concerns over the Federal Reserve’s independence ease.
Silver price (XAG/USD) extends its losses for the second successive session, trading around $39.10 per troy ounce during the Asian hours on Thursday. The price of Silver struggles due to weakened safe-haven demand, driven by the optimism over further trade deals between the US and key partners.
The Financial Times reported that the European Union (EU) and the United States (US) are closing in on a deal that would impose 15% tariffs on EU goods imported into the US. Additionally, US President Donald Trump announced on Tuesday a major tariff deal with Japan, which includes a 15% tariff on Japanese exports.
However, some caution remained amid ongoing threats of 15% to 50% tariffs on countries such as South Korea and India, which are still negotiating deals. Traders also await clarity on talks with China, with Treasury Secretary Bessent scheduled to meet Chinese officials in the week ahead. On the monetary policy front, markets are focused on next week’s Federal Reserve meeting, where rates are expected to be kept on hold, with potential cuts anticipated in October.
However, the safe-haven demand for Silver could also be dampened due to easing concerns over the Federal Reserve’s (Fed) independence. US Treasury Secretary Scott Bessent said late Thursday that a nominee for the next Federal Reserve Chair is likely to be announced in December or January. Bessent emphasized that there is “no rush” to select a successor to current Fed Chair Jerome Powell.
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.