The silver market witnessed a significant uptick as the price of XAG/USD reached near two-month highs, trading at approximately $31.60 per troy ounce during Asian market hours on Tuesday. This surge is attributed to several economic factors, including the recent rise in the US Manufacturing PMI, which climbed to 50.9 in January, up from 49.3 in December, surpassing market expectations of 49.8. As a key industrial metal, silver's role in electrification technologies and its status as a safe-haven asset during geopolitical instability or recession fears have further driven its value.
Traders are meticulously assessing the potential impacts of uncertain US trade policies on the global economy. The recent postponement of US tariffs on Mexican and Canadian goods for at least 30 days, following just two days of implementation, has added another layer of complexity to market dynamics. Amid these developments, silver continues to be a favored choice for its extensive use in various industrial sectors, including electronics and solar energy, owing to its exceptional electric conductivity.
The Silver Institute has projected a fifth consecutive year of notable market deficits for silver supply in 2025, spurred by robust industrial demand and retail investment. Such projections highlight the growing importance of silver in modern technologies and underscore the supply challenges faced by the industry. This scenario further accentuates silver's appeal as both an industrial and investment asset, with prices often mirroring those of gold.
Silver's performance is closely tied to the behavior of the US Dollar (USD), given that XAG/USD is priced in dollars. As a yieldless asset, silver tends to appreciate in value when interest rates are low, aligning with current dovish signals from major central banks. The Gold/Silver ratio serves as a critical indicator for investors to evaluate the relative valuation between these precious metals. A low ratio may suggest that gold is undervalued relative to silver, while a high ratio might indicate that silver is undervalued or that gold is overvalued.
The current market environment presents an intricate picture where silver maintains its gains amid fluctuating economic indicators and global uncertainties. Its status as a non-interest-bearing asset adds another dimension to its appeal in times of monetary policy shifts and economic transitions. The recent rise in US Manufacturing PMI has provided a positive backdrop for silver's industrial demand, reinforcing its dual role as both a commodity and a safe-haven asset.
Silver's price trajectory is also influenced by its correlation with gold movements. As investors navigate through the complexities of global markets, they often look at gold as a benchmark for evaluating silver's performance. The interconnection between these metals highlights the broader economic factors at play and underscores the strategic considerations investors must weigh when making decisions.