- Silver price jumps to near $33.00 as Trump has threatened to announce tariffs on pharmaceutical imports.
- China has stated that trade talks would begin only after the US reduces additional tariffs, which currently stand at 145%.
- The Fed is expected to leave interest rates steady on Wednesday.
Silver price (XAG/USD) surges to near $33.00 during European trading hours on Tuesday. The white metal strengthens as demand for safe-haven assets increasez after United States (US) President Donald Trump threatened to impose tariffs on pharmaceuticals.
On Monday, US President Trump signaled that he intends to reduce reliance on pharmaceutical imports and will announce tariffs on them in two weeks. Trump signed orders to reduce the time lag for approval of new pharma plants and instructed the Environmental Protection Agency (EPA) to accelerate the construction of new manufacturing facilities.
Meanwhile, persistent uncertainty over US-China trade talks continues to support the demand for safe-haven assets, such as Silver. Both nations are trading at a very high level of tariffs, dampening the operating margins of businesses. The US has imposed 145% tariffs on imports from China, while the latter is taking 125% import duty. Washington has signaled that these levels of tariffs are not sustainable, but it wants Beijing to initiate trade talks before lowering import duties. However, Beijing has clarified that it will come to the table for trade negotiations only after the US trims additional levies.
Additionally, the US Dollar’s underperformance ahead of the Federal Reserve’s (Fed) monetary policy decision on Wednesday has also supported the Silver price. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades lower around 99.60. Technically, a lower US Dollar makes the Silver price an attractive bet for investors.
According to the CME FedWatch tool, traders have fully priced in that the Fed will leave interest rates steady in the range of 4.25%-4.50% for the third straight meeting in a row.
The scenario of the Fed maintaining interest rates bodes poorly for non-yielding assets, such as Silver.
Silver FAQs
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.