Silver hits new all-time high on geopolitical risks, Fed independence concerns
- Silver posts a strong rally and hits a new all-time high above the $90 mark.
- Geopolitical tensions in the Middle East strengthen demand for safe-haven assets.
- Concerns over the independence of US monetary policy weigh on the US Dollar and support precious metals.
Silver (XAG/USD) extends its bullish momentum on Wednesday and trades around $90.50 at the time of writing, up 4.30% on the day. The white metal records a fourth consecutive day of gains and reaches a new all-time high, supported by a macroeconomic and geopolitical backdrop that remains highly favorable for safe-haven assets.
Demand for Silver continues to be underpinned by rising geopolitical tensions, particularly in Iran, where widespread public protests linked to high inflation, the sharp depreciation of the Iranian Rial (IRR) and allegations of government corruption are challenging the authorities. The violent crackdown on demonstrators, which has reportedly resulted in hundreds of deaths according to human rights groups, has intensified risk aversion across global markets. Statements from US President Donald Trump, warning that military action could be considered if the repression continues, further add to the sense of uncertainty.
Against this backdrop, Silver fully benefits from its safe-haven status. Investors are seeking protection not only from geopolitical risks but also from growing institutional concerns in the United States (US). Worries surrounding the independence of the Federal Reserve (Fed) have intensified following the launch of criminal charges against its Chair, Jerome Powell, related to the management of funds allocated to the renovation of the Fed’s headquarters in Washington. Jerome Powell has denounced the move as politically motivated, arguing that it represents a pretext to influence monetary policy decisions.
These developments initially weighed heavily on the US Dollar (USD), as markets feared that an attack on the autonomy of the US central bank could undermine the country’s financial credibility and, potentially, its sovereign credit rating. Although the Greenback has shown signs of stabilization after strong public support for Jerome Powell from several major global central banks, including the European Central Bank (ECB) and the Bank of England (BoE), the broader backdrop remains supportive for precious metals.
In addition, expectations of interest rate cuts by the Federal Reserve continue to play a key role. In an environment where real yields are expected to decline and the US Dollar remains structurally under pressure, Silver retains a strong appeal for investors, especially as persistent tightness in the physical market and robust demand continue to underpin its outlook.
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.
