Silver Explodes to a Record High—What's Really Going On?
Silver prices have also caused a stir in the market after surging sharply, hitting a new record near US$85 per ounce. This surge coincided with a rise in gold, indicating investors are fleeing to safe-haven assets amid heightened global uncertainty.
The primary trigger came from the US: market concerns about the independence of the Federal Reserve (The Fed) following concerns about legal and political pressure on the central bank. As confidence in institutions and the dollar weakened, precious metals like silver became sought after.
At the same time, geopolitical tensions also contributed. The escalating protests in Iran put the market on the defensive, and silver benefited from its status as a hedge against global risks, especially when global risks suddenly rose.
But silver has an additional advantage unlike gold: its tight physical supply. Silver is widely used for industrial purposes, and when investment demand increases, the market can quickly become short of supplies, leading to price spikes.
This surge is also due to historical factors: silver has previously been significantly boosted by short squeezes and tight spot markets, making market participants more sensitive. When prices began to rise, many positions that were counter-trend were forced to close, accelerating the rise.
Expectations of a US interest rate cut also added support. If the market believes interest rates will fall, precious metals become more attractive because the opportunity cost of holding non-interest-bearing assets becomes lower. That's why silver could also "fly" when the rate cut narrative strengthens.
Going forward, silver's movement remains potentially volatile. In addition to safe haven and interest rate factors, the market is also monitoring trade/tariff issues that could impact precious metal supply flows. Therefore, silver could remain strong, but its swings are likely to be wilder than gold.
5 Key Points:
- Silver surged and hit a new record near US$85/ounce.
- Concerns about the Fed's independence weakened the dollar and boosted precious metals.
- Iranian geopolitics increased safe haven demand, prompting silver to buy.
- The silver market is tight: the combination of investment demand and industrial demand makes prices prone to "explosion."
- Expectations of a US rate cut are fueling the rally, but silver volatility is likely to remain high. (asd)
Source: Bloomberg
