Silver price (XAG/USD) retreats to near $89.25 during the early Asian session on Tuesday. The white metal faces significant volatility amid escalaring tensions in the Middle East following US-Israeli strikes on Iran. Federal Reserve (Fed) officials are set to speak later on Tuesday, including New York Fed President John Williams, Kansas City Fed President Jeff Schmid and Minneapolis President Neel Kashkari.
The United States (US) and Israel hit thousands of targets inside Iran, continuing their joint campaign after they killed its supreme leader, Ayatollah Ali Khamenei. Iran has launched retaliatory missile and drone strikes against Qatar, the UAE, Kuwait and the US Embassy in Riyadh, Saudi Arabia.
US President Donald Trump said on Tuesday that people will find out soon what the retaliation will be to an attack on the US embassy in Riyadh and over the deaths of US military personnel during the Iran conflict. Rising tensions in the Middle East could boost safe-haven assets such as Silver.
On the other hand, renewed US Dollar (USD) demand could undermine the USD-denominated commodity price. The US Manufacturing Purchasing Managers’ Index (PMI) reading for February came in stronger than expected. This report might reinforce the US Federal Reserve (Fed) to adopt a more hawkish stance and keep the interest rate higher for longer.
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.