XAG/USD consolidates below $30 as US PCE inflation looms

Silver is a highly traded precious metal among investors. It has historically been used as a store of value and medium of exchange. Although less popular than gold, traders can 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 coins or bullion, 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 cause the price of silver to escalate due to its safe-haven status, although to a lesser extent than gold. As a non-yielding asset, silver tends to rise with lower interest rates. Its movements also depend on how the US dollar (USD) behaves, as the asset is valued in dollars (XAG/USD). A strong dollar tends to keep silver prices at bay, while a weaker dollar is likely to propel prices higher. 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, especially in sectors such as electronics or solar energy, because it has one of the highest electrical conductivity of all metals – more than copper and gold. An increase in demand can raise prices, while a decrease tends to lower them. Dynamics in the US, Chinese and Indian economies may also contribute to price fluctuations: for 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 key role in pricing.

Silver prices tend to follow the movements of gold. When gold prices rise, silver usually follows suit, as their safe haven asset status is similar. The gold/silver ratio, which shows the number of ounces of silver needed to equal the value of one ounce of gold, can help determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that silver is undervalued or that gold is overvalued. Conversely, a low ratio could suggest that gold is undervalued relative to silver.