Silver rebounds sharply as buyers capitalize on recent pullback
- Silver posts strong gains on Tuesday as buyers take advantage of the recent pullback to re-enter the market.
- The macroeconomic backdrop remains supportive for precious metals despite renewed firmness in the US Dollar.
- A relative easing in geopolitical tensions could, however, cap near-term upside momentum.
Silver (XAG/USD) rebounds sharply on Tuesday and trades around $85.30, up roughly 6.50% on the day at the time of writing. The white metal recovers part of the ground lost during last week’s violent correction, as investors gradually return to the precious metals space amid prices seen as more attractive.
The recent pullback in Silver was largely driven by technical factors, including position unwinding and margin-related liquidations, rather than a clear deterioration in fundamentals. The ongoing rebound highlights an environment still marked by elevated volatility, while demand for real assets remains well supported.
From a macroeconomic perspective, expectations of monetary easing continue to play a key role. Markets are still pricing in the prospect of further rate cuts by the Federal Reserve (Fed), which structurally weighs on real yields and supports the appeal of non-yielding assets such as Silver. The nomination of Kevin Warsh as the next head of the US central bank has provided temporary support to the US Dollar (USD), but this effect is fading as investors refocus on rate cut bets.
Meanwhile, US Dollar dynamics remain a key driver for Silver. The US Dollar Index (DXY) holds near recent short-term highs, which could restrain the white metal’s upside momentum. A firmer Greenback tends to make Silver more expensive for international investors, potentially limiting buying interest.
On the geopolitical front, signs of easing tensions between the United States (US) and Iran, along with the announcement of a trade deal between the US and India, have helped improve market sentiment. This relative de-escalation reduces immediate safe-haven demand and could encourage Silver to enter a consolidation phase following its strong rebound.
Finally, the slowdown in the flow of US economic data, linked to the partial federal government shutdown, keeps uncertainty elevated around the near-term economic outlook. In this context, movements in the US Dollar and expectations surrounding US monetary policy are likely to continue steering the trajectory of Silver in the coming days.
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.
