The Silver Market: A Comprehensive Analysis by Top Investment Manager
Silver Price Dynamics
- Silver price faces selling pressure as US bond yields rise sharply.
- Middle East tensions and US political uncertainty will limit the downside in the Silver price.
- Trump’s victory could weigh on exports of US close trading partners.
In recent trading sessions, the Silver price (XAG/USD) has experienced a correction below $34.50, following a fresh more than 12-year high close to $35.00. This pause in the rally can be attributed to the rise in US Treasury yields, which have extended their upside trend.
The surge in 10-year US Treasury yields, reaching close to 4.24%, reflects investors’ expectations of a gradual policy-easing cycle by the Federal Reserve (Fed). Historically, higher yields on interest-bearing assets increase the opportunity cost of holding non-yielding assets like Silver. Additionally, the US Dollar (USD) has revisited its August high of 104.45, indicating strength against major currencies.
Despite these factors, the Silver price’s upward trend remains intact due to various catalysts. From uncertainties in US politics to escalating tensions in the Middle East, each factor is acting as a positive driver for the Silver market.
The current Vice President Kamala Harris leads by a slight margin in the Reuters/Ipsos polls against former President Donald Trump. However, concerns arise about a potential Trump victory leading to higher tariffs and lower taxes, which could prompt the Fed to adopt a more restrictive policy stance temporarily.
In the Middle East, a rocket attack by Iran-backed Hezbollah near Israel’s military base near Tel Aviv indicates ongoing tensions in the region. Precious metals like Silver are seen as safe havens during times of market uncertainty, making them attractive to investors seeking a hedge against volatile conditions.
Silver Technical Analysis
After failing to breach the key resistance level of $35.00, the Silver price has declined. The white metal gained strength after breaking above the horizontal resistance from the May 21 high of $32.50, which now acts as a support level. The upward-sloping 20-day Exponential Moving Averages (EMAs) near $32.15 indicate further upside potential.
The 14-day Relative Strength Index (RSI) is above 60.00, signaling an active bullish momentum in the market.
Silver Daily Chart
Silver FAQs: Essential Insights for Investors
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. Traders may turn to Silver to diversify their investment portfolio, for its intrinsic value, or as a hedge during high-inflation periods. Investors can buy physical Silver in coins or bars or trade it through vehicles like Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to various factors. Geopolitical instability or fears of a deep recession can drive Silver price escalation due to its safe-haven status. Lower interest rates tend to boost Silver prices, as it is a yieldless asset. The price of Silver also depends on the behavior of the US Dollar (USD) as it is priced in dollars (XAG/USD). A strong Dollar keeps Silver prices in check, while a weaker Dollar tends to push prices higher. Other factors such as investment demand, mining supply, and recycling rates also impact Silver prices.
Silver is extensively used in industries like electronics and solar energy due to its high electric conductivity, surpassing that of Copper and Gold. Fluctuations in demand from these sectors can influence Silver prices. Economic dynamics in countries like the US, China, and India also play a role in price movements. The industrial sectors in the US and China use Silver in various processes, while in India, consumer demand for Silver jewelry affects prices.
Silver prices typically follow Gold’s movements. When Gold prices rise, Silver prices tend to follow suit due to their similar safe-haven status. The Gold/Silver ratio, indicating the number of ounces of Silver needed to equal the value of one ounce of Gold, can help assess the relative valuation between the two metals. A high ratio may suggest that Silver is undervalued, while a low ratio could indicate the opposite.