The price of silver (XAG/USD) jumps to nearly $75.40 during Asian trading hours on Monday. The white metal rises as the US attacks Venezuela, boosting safe haven demand. Traders will be closely monitoring developments surrounding the US arrest of the Venezuelan leader, as Maduro and his wife will appear in federal court later on Monday.
The United States carried out a large-scale military strike against Venezuela on Saturday. US President Donald Trump announced that Venezuelan President Nicolas Maduro and his wife were arrested and flown out of the country.
Trump also said early Monday that Washington may launch a new military intervention if Venezuela’s interim president, Delcy Rodriguez, does not respond to their demands, according to The Guardian. The US attack on Venezuela is expected to raise geopolitical tensions in the region and boost safe haven flows, which provide some support to white metal prices.
Moreover, rising expectations for further cuts in US interest rates may contribute to silver’s rise. Financial markets are currently pricing in the Fed cutting interest rates by a quarter point this year. Lower interest rates can reduce the opportunity cost of holding silver, supporting the non-yielding precious metal.
Traders are awaiting the US December Manufacturing Purchasing Managers’ Index (PMI) data, which will be published later on Monday. If the report shows a stronger than expected result, this could lift the US dollar and put pressure on US dollar-denominated commodity prices in the near term. On Friday, US non-farm payrolls data will take center stage.
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 at bay, 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.
