Silver price rebounds strongly to near $68.20 as Trump pauses strikes on Iran’s power plants

Silver price recovers strongly as Trump instructs to pause military strikes on Iranian power plants.
Trump’s announcement has boosted investors’ risk appetite and has weakened USD’s safe-haven demand.
Traders might raise dovish bets for global central banks if oil prices continue to remain lower.

Sagar Dua FXStreet

Silver price (XAG/USD) bounces back strongly to near $68.20 during the European trading session on Monday. The white metal recovers its early losses and turns marginally positive, following the announcement from United States (US) President Donald Trump through a post on Truth.Social that he has instructed the Department of War to pause military attacks on Iranian power plants for five days.

“I am pleased to report that the United States of America, and the country of Iran, have had, over the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East. Based on the tenor and tone of these in depth, detailed, and constructive conversations, which will continue throughout the week, I have instructed the Department of War to postpone any and all military strikes against Iranian power plants and energy infrastructure for a five-day period, subject to the success of the ongoing meetings and discussions.” Trump wrote.

Trump’s announcement of a pause on scheduled attacks on Iranian power plants has resulted in a sharp improvement in investors’ risk appetite, leading to a significant decline in the US Dollar (USD) and the oil price.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades almost flat around 99.50 after giving back its early losses.

Theoretically, safe-haven assets, such as the Silver price, carry a negative relation with market sentiment. However, the Silver price has rebounded strongly as it was declining in the past few weeks, with accelerating hopes of tightening monetary conditions by global central banks due to surging oil prices.

Speculation that global central banks would adopt an extended pause on interest rates or raise them would ease if the oil price continues to decline. WTI oil price has fallen significantly from its intraday high of $100.10 below $90.00 at the press time.

Earlier in the day, the Silver price plummeted 10% to near $61.00 as Iran vowed retaliation against US President Trump’s threats to bomb Iran’s power plants.

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

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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