Silver’s Next Move

It's been a while since my last silver post. The latest surge in silver prices is turning heads again, but if you think this is just another fear trade, you’re missing the bigger story.

Normally, you’d expect precious metals like silver to fall when geopolitical tensions cool. Instead, silver is rising and in many cases, outperforming gold. So what’s really going on? Over the past few days, silver has surged alongside gold as markets price in the possibility of a diplomatic breakthrough in the Middle East. Prices have jumped sharply, with silver gaining several percentage points in just a few sessions.

Silver is seeing less of a traditional safe haven rally. In fact, it’s almost the opposite. As tensions ease, oil prices have begun to fall and the U.S. dollar has weakened. That combination is critical. Lower energy costs reduce inflation pressure, which in turn opens the door for central banks especially the Federal Reserve to consider cutting interest rates. Silver benefits when interest rates fall and the dollar weakens. Lower yields make non interest bearing assets like precious metals more attractive.

So as traders we need to think of silver as less than a safe haven asset. The Fed controls all and since it is deeply tied to the real economy. When markets anticipate economic recovery like reopening trade routes or stabilizing energy costs industrial demand expectations rise. I am trying to rethink how I look at silver trading and so should you!