Silver (XAG/USD) trades lower on Tuesday, hovering around $78.20 at the time of writing, down 1.88% on the day. Investors are adopting a cautious stance ahead of the confirmation hearing of Kevin Warsh, the nominee proposed by US President Donald Trump to become the next Chair of the Federal Reserve (Fed).
Markets will closely watch Warsh’s testimony before the Senate Banking Committee to assess the direction he could give to monetary policy. Investors are particularly looking for signals on whether his decisions will be influenced by Washington’s economic agenda or if he will prioritize preserving the independence of the central bank.
Trump added political pressure ahead of the hearing. Speaking to CNBC on Tuesday, he said he would be “disappointed” if Kevin Warsh does not move quickly to cut interest rates once in office. The remarks reinforce investors’ concerns about potential political influence over the Fed’s policy decisions and will likely keep markets attentive to Warsh’s stance on monetary easing during his confirmation hearing.
The prospect of Warsh leading the Fed remains a key factor for Silver. At the end of January, his nomination triggered a sharp sell-off in the white metal, which dropped more than 30% after reaching a record high near $121.60. The decline reflected Warsh’s reputation for opposing Quantitative Easing during his time at the central bank under former Chair Ben Bernanke, as well as his preference for a stronger US Dollar.
Meanwhile, the latest US macroeconomic data is also providing support to the Greenback. Retail Sales increased by 1.7% in March, beating market expectations of a 1.4% rise, highlighting resilient consumer demand and reinforcing the strength of the US economy.
On the geopolitical front, markets are also monitoring developments surrounding tensions between the US and Iran. Reports suggesting that Tehran may be willing to resume peace talks with Washington have so far provided only limited support to Silver, as investors await clearer signals on the outlook for the conflict.
In the near term, Silver’s trajectory will likely depend on Kevin Warsh’s remarks during his confirmation hearing, as well as upcoming US economic data and the direction of the US Dollar.
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.