Silver gains on US trade uncertainty, Iran tensions

Silver posts strong gains as US trade uncertainty revives safe-haven demand.
The US Supreme Court ruling against Donald Trump’s tariff policy weighs on the US Dollar.
Geopolitical tensions with Iran and expectations of monetary easing add further support.

Ghiles Guezout FXStreet

Silver (XAG/USD) trades around $86.50 on Monday at the time of writing, up 2.35% on the day, benefiting from a marked resurgence in safe-haven demand. The white metal draws support from heightened political and trade uncertainty in the United States (US), which weighs on overall risk sentiment and on the US Dollar (USD).

The US Supreme Court ruled that President Donald Trump overstepped his authority by using the International Emergency Economic Powers Act to impose so-called “reciprocal” tariffs, deeming them illegal. While the decision limits the executive branch’s unilateral trade powers, it does not end tensions. Donald Trump sharply criticized the ruling and announced a temporary 15% global tariff on imports, hinting that additional measures could follow. This escalation sustains uncertainty surrounding international trade and revives concerns over potential supply chain disruptions.

Against this backdrop, the US Dollar Index (DXY), which measures the US Dollar against a basket of six major currencies, declines by 0.35% and trades near 97.45 at the time of press. A weaker US Dollar makes Silver more attractive for holders of other currencies, mechanically reinforcing demand for the precious metal.

Meanwhile, expectations of monetary easing from the Federal Reserve (Fed) continue to underpin precious metals. Despite still-elevated inflation data, markets are pricing in the possibility of multiple rate cuts in the coming months, amid signs of slowing growth and persistent fiscal uncertainty. The prospect of lower real yields increases the appeal of non-yielding assets such as Silver.

Geopolitical tensions in the Middle East add another layer of risk aversion. According to a report from the Wall Street Journal, the US President is considering a limited military strike on Iran to pressure Tehran in negotiations over its nuclear program. Although diplomacy remains the official path, the mere consideration of military action fuels investor caution.

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

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