Silver consolidates as markets await Fed decision amid geopolitical tensions
- Silver trades within a narrow range amid widespread caution ahead of Wednesday’s Federal Reserve interest rate decision.
- The US Dollar stabilizes and Treasury yields edge higher, limiting the metal’s short-term upside.
- Geopolitical tensions continue to support defensive demand as markets still expect another Fed rate cut in December.
Silver (XAG/USD) remains stable at the start of the week, trading around $58.40 on Monday at the time of writing, up 0.1% on the day. The white metal extends its consolidation phase, as investors avoid taking fresh positions before the Federal Reserve’s policy announcement on Wednesday. This cautious stance keeps XAG/USD confined within its tight multi-session range.
Markets continue to anticipate another cut to the Federal Funds Rate at the final meeting of the year, which would bring the target range down to 3.50%-3.75%. However, the slowdown in disinflation shown by recent price indicators, alongside more mixed labour-market signals, is prompting investors to consider a more measured pace of monetary easing into 2026. This outlook is helping to stabilize the US Dollar (USD) and push Treasury yields higher, acting as a headwind for Silver in the short term.
Recent US household spending and inflation data, particularly the Personal Consumption Expenditures (PCE) index, the Fed’s preferred gauge, suggest that disinflation is losing momentum. Meanwhile, labour-market figures have delivered mixed signals, including weaker private-sector job creation and a decline in jobless claims. These developments heighten uncertainty over the magnitude of upcoming monetary easing, reinforcing the cautious tone across markets, including Silver.
At the same time, geopolitical risks continue to provide structural support for safe-haven assets. Ongoing Russia-Ukraine tensions and the deterioration in Southeast Asian diplomatic relations sustain defensive demand, a trend also reflected recently in the Gold (XAU/USD) market dynamics.
Against this backdrop, the Fed’s decision is expected to be the key source of volatility for XAG/USD this week. Until then, Silver remains locked in consolidation, within a market dominated by caution and a mild recovery in the US Dollar.
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.
Author
Ghiles Guezout
FXStreet
Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.
