Silver price declines on US policy shift, easing geopolitical tensions
- Silver price retreats early in the week after a shift in perceptions around US monetary policy.
- Easing geopolitical tensions and cautious Fed commentary reduce the appeal of safe-haven assets.
- Recent price action in Gold spills over into Silver, amplifying the corrective phase.
Silver (XAG/USD) trades sharply lower on Monday, hovering around $81.80 at the time of writing, down 2.0% on the day. The white metal extends the corrective move that began after last week’s steep drop, as markets rapidly reassess the macroeconomic and monetary outlook in the United States (US).
Selling pressure intensified after US President Donald Trump announced the nomination of Kevin Warsh as Chair of the Federal Reserve (Fed). Markets interpret this choice as a signal of a more disciplined and cautious approach to monetary easing. This perception has prompted renewed caution toward non-yielding assets such as Silver, following a powerful rally that had driven prices to record highs and encouraged heavy profit-taking.
At the same time, Silver’s safe-haven appeal is fading as geopolitical tensions ease. Recent talks between the United States and Iran have helped reduce fears of a military escalation in the Middle East, dampening demand for precious metals. This dynamic mirrors recent developments in Gold (XAU/USD), whose sharp correction highlighted how sensitive safe-haven assets are to shifts in geopolitical risk and overall market sentiment.
Cautious remarks from several Fed officials are also reinforcing this trend. Some policymakers have stressed that there is no urgency to cut interest rates further, arguing that the current stance of monetary policy is broadly neutral. This measured communication curbs expectations of rapid easing, weighing on Silver.
Finally, heightened volatility and higher margin requirements in Futures markets have intensified forced selling and the unwinding of speculative positions in Silver. While structural factors such as a long-term supply deficit and continued interest in real assets amid rising government debt remain supportive over the medium term, the market now appears to be entering a consolidation phase after pronounced excesses.
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.
