Silver price (XAG/USD) recovers some of its intraday losses and strives to hold the key level of $30.00 in Tuesday’s European session. The white metal trades with caution amid a dismal market sentiment. The marker sentiment is deeply risk-averse as global technology, power, and data center stocks have faced an intense sell-off as market experts believe that Chinese Deepseek’s low-cost Artificial Intelligence (AI) model could challenge the dominance of top chatbots like OpenAI and Meta.
Technically, the appeal of precious metals increases in a highly risky market environment. However, a significant surge in the US Dollar (USD) and bond yields has restrictive the upside in the Silver price. The safe-haven demand for the US Dollar has increased significantly amid a sharp sell-off in technology stocks. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps to near 108.00.
Meanwhile, 10-year US Treasury yields jump to near 4.56% ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday. The Fed is certain to announce a temporary pause in the policy-easing cycle and leave interest rates unchanged in the range of 4.25%-4.50%, according to the CME FedWatch tool.
Investors will pay close attention to Fed Chair Jerome Powell’s press conference to know for how long the Fed will keep borrowing rates steady. Market participants would be keen to know the impact of potential tariffs by President Donald Trump on the monetary policy stance and the economy.
Silver price struggles near the 50-day Exponential Moving Average (EMA) around $30.40. The white metal continues to face pressure near the upward-sloping trendline around $30.90, which is plotted from the 29 February 2024 low of $22.30 on a daily timeframe.
The broader outlook of the Silver price remains firm above the 200-day Exponential Moving Average (EMA), which trades around $29.50.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a 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 high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves 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, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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