Silver price (XAG/USD) maintains its strength after recording a sharp decline of more than 7% in the previous session, trading around $73.50 per ounce during Asian hours on Tuesday. Traders engaged in aggressive profit taking after the XAG/USD pair reached a record high of 85.87 on Monday.
Silver prices faced challenges after the Chicago Mercantile Exchange decided to raise margin requirements on silver futures contracts, forcing leveraged traders to reduce exposure as prices became technically overstretched. Analysts said the decline reflects a disintegration of the situation rather than a weakening of underlying demand.
Despite near-term volatility, silver continues to attract support from structural supply constraints and strong industrial demand, especially from the solar, electronics and data center sectors. Silver’s rally is also fueled by rising speculative demand in China, which has pushed premiums on the Shanghai Futures Exchange to record levels. These higher premiums indicate sharp domestic demand and have tightened global supply chains, reflecting earlier inventory pressures in the coffers of London and New York.
Safe-haven silver demand remains strong amid ongoing geopolitical risks. Uncertainty has resurfaced around efforts to end the war in Ukraine after alleged strikes on President Putin’s residence. In the Middle East, Saudi air strikes in Yemen and Iran’s declaration of a “full-scale war” with the United States, Europe and Israel have raised fears of wider instability, with Trump warning of more strikes if Iran resumes rebuilding its nuclear programme.
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.
