Silver rises on safe-haven demand amid US shutdown, geopolitical risks
- Silver extends its rebound, supported by strong safe-haven flows amid ongoing political and economic uncertainty.
- The US government shutdown and rising geopolitical tensions continue to fuel demand for precious metals.
- Markets await key US inflation and activity data later this week while expectations of Fed rate cuts remain elevated.
Silver (XAG/USD) advances on Monday, trading around $52.20 per troy ounce at the time of writing, up 0.70% on the day. The grey metal recovers strongly after Friday’s correction, supported by renewed demand for safe-haven assets as geopolitical and fiscal concerns weigh on market sentiment.
Investors continue to seek refuge after the US government shutdown entered its third week with no resolution in sight. The prolonged political impasse is raising fears of a deeper economic slowdown and delays in the publication of key economic indicators.
At the same time, renewed tensions in the Middle East and uncertainty surrounding the upcoming US-China trade talks reinforce risk aversion. US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are expected to meet in Malaysia this week, a development that could influence global market sentiment depending on the tone of the discussions.
Meanwhile, expectations of further monetary easing by the Federal Reserve (Fed) remain a major driver for Silver. According to the CME FedWatch tool, markets are pricing in a near-certain rate cut at the October Federal Open Market Committee (FOMC) meeting, followed by a high probability of another reduction in December. This dovish outlook, combined with a softer US Dollar (USD) and lower Treasury yields, continues to enhance the appeal of non-yielding assets such as Silver.
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.
