- Silver price extends its uptrend to near $31.00 amid heavy selling in the US dollar.
- The dollar faces pressure as Trump announced lower tariffs on China than expected.
- The Fed is expected to keep interest rates steady at the next three policy meetings.
The price of silver (XAG/USD) regained its highest level in more than a month at $30.95 in the European session on Wednesday. The white metal is strengthening as the US dollar continues its downward trend due to the less fearful tariff plans announced by US President Donald Trump in his first two days in office.
The US Dollar Index (DXY), which tracks the dollar’s value against six major currencies, updated to a two-week low of 107.80. The decline in the US dollar makes the price of silver inexpensive for investors. US 10-year Treasury yields fell to approximately 4.57%.
Trump announced 25% tariffs on Mexico and Canada, and is discussing 10% tariffs on China starting February 1. However, his comments during the election campaign indicated that the tariffs would be much higher than what he had already announced.
A tariff cut by Trump would also impact market speculation that the Federal Reserve (US central bank) will keep interest rates at current levels for longer. Market participants expected higher tariffs to increase demand for locally produced goods and services. This scenario would have led to an acceleration of inflationary pressures.
Currently, the CME FedWatch tool shows that traders are confident that the Fed will maintain key borrowing rates in a range of 4.25%-4.50% at the next three policy meetings.
Technical analysis of silver
Silver price is gathering strength to return above the sloping trend line on the north side near $30.85, which was drawn from the February 29, 2024 low of $22.30 on the daily time frame.
The white metal detected strong buying interest near the 200-day Exponential Moving Average (EMA), around $29.45, and has now extended its uptrend above the 20-day EMA, which is around $30.26. This indicates that the general trend has turned to the upside.
The 14-day RSI has risen to nearly 60.00. A new bullish momentum could start if it manages to break above the 60.00 level.
Silver daily chart
Frequently asked questions about silver
Silver is a precious metal that is widely traded among investors. It has been used historically as a store of value and 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 periods of high inflation. Investors can buy physical silver, in the form of coins or bullion, or trade it through instruments such as exchange-traded funds, which track its price in international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession could cause the price of silver to rise due to its safe-haven status, although to a lesser extent than the price of gold. As a non-yielding asset, silver tends to rise as interest rates fall. Its movements 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, while a weak dollar is likely to push prices higher. Other factors such as investment demand, mining supplies – silver is more plentiful than gold – and recycling rates can also influence prices.
Silver is widely used in industry, especially in sectors such as electronics or solar energy, as it has one of the highest electrical conductivity of all metals – more than copper and gold. A rise in demand can cause prices to rise, while a fall tends to bring them down. Dynamics in the economies of the United States, China and India can also contribute to price fluctuations: for the United States, and especially China, its large industrial sectors use silver in various processes; In India, consumer demand for the precious metal used in jewelery also plays a major role in determining prices.
Silver prices tend to follow gold movements. When gold prices rise, silver usually follows suit, as its status as a safe haven asset is similar. The gold/silver ratio, which shows how many ounces of silver are needed to equal the value of one ounce of gold, may help determine the relative valuation between the two metals. Some investors may consider a high ratio to be an indication that silver is undervalued, or that gold is undervalued. Conversely, a low ratio may indicate that gold is undervalued compared to silver.
