- Silver prices fall as the US dollar strengthens, with expectations that the Federal Reserve will maintain interest rates in January.
- Silver demand could rise due to ongoing concerns about supply issues, especially in London’s vaults, coupled with strong industrial demand.
- Silver futures premiums fall after reports that Trump plans to delay new tariffs.
Silver (XAG/USD) price has paused its three-day rally and is trading around $30.60 during the Asian session on Thursday. Dollar-denominated silver faces challenges as the US dollar is likely to rise, with traders expecting the US Federal Reserve to keep its benchmark overnight interest rate in a range of 4.25%-4.50% during its January meeting.
In addition, US President Donald Trump’s policies could increase inflationary pressures, which could limit the Fed to cutting interest rates once. This could support the dollar and reduce demand for commodities such as silver.
However, silver demand may be boosted by ongoing concerns over supply issues, especially in London’s vaults, coupled with strong industrial demand, especially in manufacturing, which has supported the gray metal.
Initially, US President Donald Trump’s tariff threats pushed silver futures premiums higher as traders braced for potential disruptions. However, reports that Trump would delay new tariffs helped ease some of the pressure, leading to lower premiums.
On Tuesday night, President Trump announced plans to impose a 25% tariff on imports from Canada and Mexico, as well as tariffs on the European Union. He also revealed the intention to implement a 10% tariff on Chinese imports starting February 1, citing concerns about shipments of fentanyl from China to Mexico and Canada, according to Reuters.
In response, Chinese Vice Premier Deng Xuexiang on Tuesday warned of the potential consequences of a trade war, noting that “there are no winners” in such conflicts. His comments come as China prepares for the possibility of new tariffs under the Trump administration, as CNBC reported.
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 low, 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.
