Silver declines as firm US Dollar, risk tone weigh on safe-haven appeal
- Silver edges lower toward $51.20, down 0.35% on the day.
- A firmer risk tone and a resilient US Dollar weigh on the metal.
- Fed rate cut expectations and geopolitical tensions support Silver.
Silver (XAG/USD) trades lower on Tuesday, around $51.20 at the time of writing. Despite this decline, any meaningful correction remains limited, as investors continue to show interest in the white metal amid elevated geopolitical uncertainty and a growing likelihood of further US monetary easing. In the short term, however, the improvement in global risk appetite is reducing safe-haven demand and limiting upside attempts.
At the same time, the US Dollar (USD) is holding onto part of its recent gains, curbing the attractiveness of Silver for international buyers. The Greenback remains firm near key technical levels, although traders remain cautious ahead of a series of major US macroeconomic releases.
This caution follows mixed signals from Federal Reserve (Fed) officials in recent days. Comments from John Williams, President of the Federal Reserve Bank of New York, suggesting that rates could be lowered without jeopardizing the inflation target, and from Christopher Waller, who argued that labor market softness may justify another rate cut in December, have strengthened expectations of further easing.
According to the CME FedWatch tool, the chance of a 25-basis-point rate cut in December is now close to 80%, a development that broadly supports non-yielding precious metals as real yields decline.
Geopolitical tensions also remain a key driver of safe-haven demand. The escalation of the Russia–Ukraine conflict, with new strikes on Kyiv, and persistent frictions in the Middle East despite a fragile ceasefire continue to push investors toward defensive assets. Any renewed deterioration in global risk sentiment could therefore quickly revive demand for Silver.
Attention now turns to US economic data releases later in the day, including the Producer Price Index, Retail Sales, Pending Home Sales, and the Richmond Manufacturing Index. These figures may inject volatility into the US Dollar and offer short-term opportunities on XAG/USD, as the market assesses whether the broader bullish trend remains intact despite the ongoing consolidation phase.
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.
