- The price of silver is consolidating with a positive trend around the psychological mark of $30.00.
- Increasing tensions in the Middle East could support the safe haven silver.
- The yieldless grey metal is receiving support from rising expectations of a Fed rate cut in September.
Silver (XAG/USD) is fluctuating around USD 29.90 per troy ounce during the Asian session on Monday, with market sentiment favoring safe-haven assets following rising geopolitical tensions in the Middle East.
According to Al Jazeera reports, Hamas has rejected new terms proposed by Israel in the ceasefire talks in Egypt and insisted that Israel adhere to those set by US President Joe Biden and the UN Security Council.
After concluding a three-day trip to the Middle East, U.S. Air Force General CQ Brown, chairman of the Joint Chiefs of Staff, told Reuters early Tuesday that concerns about a looming major conflict in the region had eased after no further exchanges of fire between Israel and Lebanon’s Hezbollah.
Read more: US General Brown: Risk of wider war “slightly” reduced after clashes between Israel and Hezbollah
Non-yielding assets like silver are gaining ground as the likelihood of a rate cut by the US Federal Reserve (Fed) in September increases. Fed Chairman Jerome Powell said at the Jackson Hole Symposium on Friday: “It’s time to adjust policy.” However, Powell did not provide any information on when the rate cuts would begin or how large they might be.
In addition, Mary Daly, president of the U.S. Federal Reserve Bank of San Francisco, said in an interview with Bloomberg TV on Monday that “the time has come” to start cutting interest rates, likely starting with a quarter-percentage point cut.
Frequently asked questions about silver
Silver is a precious metal that is widely traded among investors. It has historically been used as a store of value and a medium of exchange. Although it is less popular than gold, traders can turn to silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge in times of high inflation. Investors can buy physical silver in coins or bars, or trade it through instruments such as exchange-traded funds that track its price on international markets.
The price of silver can change based on a variety of factors. Geopolitical instability or fear of a severe recession can drive up the price of silver due to its safe-haven status, although to a lesser extent than gold. As a non-yielding investment, silver tends to rise when interest rates are lower. Its movements also depend on how the U.S. dollar (USD) behaves, as the asset is valued in dollars (XAG/USD). A strong dollar tends to keep the price of silver in check, while a weaker dollar is likely to drive prices higher. Other factors such as investment demand, mining supply—silver is much more common than gold—and recycling rates can also affect prices.
Silver is widely used in industry, especially in areas such as electronics or solar energy, because it has one of the highest electrical conductivities of any metal – higher than copper and gold. A surge in demand can raise prices, while a decline tends to lower them. The dynamics of the US, Chinese and Indian economies can also contribute to price fluctuations: in the US and especially in China, silver is used in various processes in major industries; in India, consumer demand for the precious metal for jewelry also plays an important role in pricing.
Silver prices tend to follow the movements of gold prices. When gold prices rise, silver usually follows the trend as they share a similar status as safe haven assets. The gold/silver ratio, which indicates the number of ounces of silver required to equal the value of one ounce of gold, can help determine the relative value of both metals. Some investors consider a high ratio to be an indicator that silver is undervalued or gold is overvalued. On the contrary, a low ratio could indicate that gold is undervalued compared to silver.
