- The downside of silver as a safe haven may be limited due to increasing geopolitical tensions.
- Hamas rejected the terms of a hostage release and ceasefire agreement discussed in Doha on Thursday and Friday.
- Ukraine launched the largest invasion of Russia since World War II.
Silver (XAG/USD) is recording minor losses and is trading around $29.00 per troy ounce during Monday’s Asian session, but the safe-haven silver’s downside may be limited due to rising geopolitical tensions.
On Sunday, conflicting statements from Hamas and Israel clouded the chances of a breakthrough on a ceasefire. Hamas issued a statement rejecting the terms of a hostage release and ceasefire deal discussed in Doha on Thursday and Friday. The group accused Prime Minister Benjamin Netanyahu of introducing new obstacles to the negotiations, Reuters reports, citing local news agency Times of Israel.
Israeli Prime Minister Benjamin Netanyahu will meet with US Secretary of State Antony Blinken on Monday. Following the meeting, Blinken will travel to Cairo, where negotiations on an agreement will continue. The US has announced that it will host a second meeting later this week and intends to conclude the agreement by the end of the week.
In addition, concerns grew about escalating tensions between Ukraine and Russia as Ukraine launched the largest invasion of Russia since World War II. The ministry released a video showing General Valery Gerasimov, the commander of Russian military operations, visiting another combat zone in Ukraine. Gerasimov received reports from commanders and “set tasks for further actions,” according to Reuters.
Non-interest-bearing silver prices may continue to rise due to the likelihood of a rate cut by the Federal Reserve (Fed) starting in September. Last week’s US economic data showed that retail sales beat expectations, while both the Producer Price Index (PPI) and Consumer Price Index (CPI) suggested that inflation is easing.
According to the Financial Times, Mary Daly, President of the Federal Reserve Bank of San Francisco, stressed on Sunday that the US central bank should gradually reduce borrowing costs. In addition, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, warned that central bank officials should be cautious not to maintain a restrictive policy longer than necessary.
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 as well, as they have a similar status as a safe-haven asset. 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 indicate that silver is undervalued or gold is overvalued. On the contrary, a low ratio could indicate that gold is undervalued compared to silver.
