Silver price slides as safe-haven Dollar, higher yields outweigh geopolitical support
- Silver drops on Thursday, slipping back below the $70 level.
- Middle East tensions support the US Dollar amid rising risk aversion.
- Higher-for-longer interest rate expectations continue to pressure precious metals.
Silver (XAG/USD) trades lower on Thursday, hovering around $68.50 at the time of writing, down 3.85% on the day, extending its pullback after earlier gains this week.
The white metal is weighed down by renewed demand for the US Dollar (USD) amid persistent geopolitical tensions in the Middle East. Iran’s rejection of a US-proposed ceasefire deal is fueling uncertainty, while ongoing military exchanges in the region maintain a strong risk-off environment. In this context, the Greenback regains its appeal as a safe-haven asset, mechanically pressuring USD-denominated precious metals.
At the same time, rising Oil prices are stoking global inflation concerns, reinforcing expectations that central banks may keep interest rates higher for longer. Investors are increasingly pricing in a prolonged restrictive stance from major central banks, particularly the Federal Reserve (Fed).
This repricing is pushing US Treasury yields higher, making Silver less attractive as a non-yielding asset. Meanwhile, capital flows are shifting toward liquidity, as investors move into cash positions to cover losses or reduce exposure amid heightened market volatility.
Despite the supportive backdrop that geopolitical tensions typically provide for safe-haven assets, Silver is struggling to benefit, as US Dollar strength and rising yields continue to dominate market dynamics.
Market participants remain focused on developments in the Middle East, as well as on inflation trends and monetary policy expectations, which are likely to remain the key drivers for Silver in the near term.
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.
