Silver trades higher on safe-haven demand, Fed policy focus
- Silver trades higher on Wednesday, supported by defensive flows.
- Investors favor precious metals amid political uncertainty in the US and doubts over Fed independence.
- Attention turns to the Federal Reserve’s policy decision and signals on the future path of interest rates.
Silver (XAG/USD) trades around $114 on Wednesday at the time of writing, up about 1.80% on the day. The white metal extends its bullish momentum and maintains a positive bias, underpinned by persistent demand for safe-haven assets in an environment marked by risk aversion and a weaker US Dollar (USD).
Interest in precious metals is intensifying as investors react to comments from US President Donald Trump, who said he was unconcerned about the recent decline in the US Dollar. These remarks reinforce the idea that the US administration is comfortable with, or even supportive of, a weaker currency to boost export competitiveness. This perception adds further pressure on the Greenback and mechanically supports Dollar-denominated assets such as Silver.
Silver is benefiting from the broader climate of political uncertainty in Washington. Tensions surrounding budget negotiations, trade threats, and growing questions over the independence of the Federal Reserve (Fed) are fueling a narrative of distrust toward US assets. In this context, investors are seeking protection by increasing exposure to precious metals, which are widely viewed as stores of value during periods of instability.
The Fed’s policy meeting is another key driver for the market. The US central bank is expected to keep interest rates unchanged in a 3.50%-3.75% range at the conclusion of its meeting, which is scheduled for later in the day. After several rate cuts earlier this year, markets will closely scrutinize Chair Jerome Powell’s press conference for clues on the future direction of monetary policy. Any hint of a prolonged accommodative bias could further weigh on the US Dollar and reinforce the appeal of Silver, a non-yielding asset that is highly sensitive to real rate expectations.
The geopolitical backdrop is also supporting safe-haven demand. As recently observed in the Gold (XAU/USD) market, persistent international tensions and the lack of quick resolutions to several major conflicts continue to foster a cautious stance among investors. This environment encourages greater allocation toward precious metals, with Silver benefiting both from its defensive characteristics and from speculative interest tied to the strength of its recent trend.
Finally, despite a sharp rise in prices, some market participants believe that short-term structural bullish drivers remain in place. The combination of a weaker US Dollar, expectations of a more accommodative monetary stance, and an uncertain political environment continues to underpin Silver prices, even though intermittent profit-taking cannot be ruled out after such a strong rally.
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.