Silver prices saw an uptick amid rising demand for safe havens after the U.S. announced new auto tariffs. This non-interest-bearing asset might be drawing attention from buyers given the dip in U.S. treasury yields and a weaker U.S. dollar.
Currently, Silver (XAG/USD) is recovering from Wednesday’s losses, trading near $33.70 per troy ounce during Thursday’s Asian trading hours. The backdrop for this increase in Silver’s appeal is growing investor caution stemming from the new tariffs. The U.S. administration confirmed a 25% tariff on auto imports effective from April 2, with significant implications for global trade relations.
Adding to Silver’s allure, U.S. treasury yields have been falling, with 2-year and 10-year notes registering rates of around 4.0% and 4.34%, respectively. Alongside this, a softer U.S. dollar has made Silver more accessible to international buyers, thus providing extra buoyancy to its demand.
In the policy realm, the Federal Reserve has reaffirmed its expectation of two rate cuts this year. However, they remain prudent, with Neel Kashkari of the Minneapolis Fed noting, "The labor market remains robust, but completing the task at hand presents challenges," resonating with Chair Powell’s cautious approach to immediate rate reductions. Kashkari also touched on the unpredictable nature of policy-making currently plaguing the Fed.
Attention is now glued to forthcoming U.S. economic indicators, with Initial Jobless Claims and the final Q4 GDP report slated for Thursday, and the all-important Personal Consumption Expenditures (PCE) report on Friday—a crucial inflation measure for the Federal Reserve.
Silver FAQs
Silver holds a significant spot in the world of trading for investors globally. Historically revered as both a store of value and a medium of exchange, it allows for portfolio diversification. Though not as renowned as Gold, Silver serves as a hedge during inflationary periods. Investors have various avenues to obtain Silver—be it purchasing physical coins or bars, or engaging in Exchange Traded Funds that mirror its market price.
The price of Silver is sensitive to numerous elements. Its status as a safe haven can lead prices higher in times of geopolitical unrest or an economic downturn, albeit its impact is typically less pronounced than Gold’s. Being a non-yielding asset, its value tends to rise when interest rates fall. The movement of Silver is also linked to fluctuations in the U.S. dollar (XAG/USD), with a strong dollar suppressing and a weak dollar boosting Silver prices. Other influences include demand from traders, the supply from mining operations—Silver being more plentiful than Gold—and recycling activities, all of which can impact pricing.
In industrial applications, especially electronics and solar energy sectors, Silver is highly sought after due to its superior electrical conductivity, surpassing both Copper and Gold. Demand fluctuations in these sectors can drive prices up or down. The economies of the U.S., China, and India also play a role in these dynamics. U.S. and China, with their vast industrial bases, utilize significant amounts of Silver, while in India, consumer demand for jewelry significantly affects its market valuation.
Silver often mirrors Gold’s price trends. As Gold prices jump, Silver typically follows due to their mutual safe-haven appeal. Observing the Gold/Silver ratio—which measures how much Silver equates to an ounce of Gold—provides insights into their relative value. Investors might interpret a high ratio as a sign that Silver is undervalued or Gold overvalued, while a low ratio could suggest the opposite.
