XAG/USD is losing traction below $31.50 as Fed officials signal a cautious stance on rate cuts

Silver is a heavily traded precious metal among investors. In the past, it was used as a store of value and medium of exchange. Although it is less popular than gold, traders may turn to silver to diversify their investment portfolio, for its intrinsic value, or as a potential hedge during times of high inflation. Investors can purchase physical silver in coins or bars, or trade it through vehicles such as exchange-traded funds that track its price on international markets.

The price of silver can fluctuate based on a variety of factors. Geopolitical instability or fear of a deep recession can cause silver prices to escalate due to its safe-haven status, although to a lesser extent than gold. As a non-yielding asset, silver tends to appreciate when interest rates are lower. Its movements also depend on how the US dollar (USD) behaves when the asset is valued in dollars (XAG/USD). A strong dollar tends to keep silver prices in check, while a weaker dollar is likely to push 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, particularly in areas such as electronics or solar energy, because it has one of the highest electrical conductivities of any metal – more than copper and gold. An increase in demand can increase prices, while a decrease tends to lower them. Dynamics in the economies of the US, China and India can also contribute to price fluctuations: in the US and especially China, their large industrial sectors use silver in various processes; In India, consumer demand for the precious metal for jewelry also plays a crucial role in pricing.

The price of silver tends to follow the movements of gold. When gold prices rise, silver tends to follow suit as their safe-haven status is similar. 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 valuation of both metals. Some investors may view a high ratio as 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.