By Daniela Sabin Hathorn, senior market analyst at Capital.com
The price of silver (XAG/USD) entered a consolidation phase on Wednesday morning, trading within a narrow range around $36.50 following a period of heightened volatility. However, sentiment quickly shifted after comments from the Chinese Vice Premier regarding ongoing trade negotiations with the United States in London. While the remarks were not overtly negative, they underscored the challenges ahead, reminding markets that a smooth path to a trade deal is far from guaranteed. The statement that China is “not willing to fight but not afraid to fight” sparked renewed caution, triggering a sharp 1.4% drop in silver prices within just five minutes.
Silver (XAG/USD) daily chart & Gold/Silver ratio (blue line)
Past performance is not a reliable indicator of future results.
The daily chart reflects a potential technical reset after the recent bullish surge. The Relative Strength Index (RSI) is flirting with a dip below 70, indicating that overbought conditions may be easing. Despite this, the prevailing trend remains upward in the absence of fresh geopolitical or economic frictions. A critical short-term catalyst will be the upcoming US Consumer Price Index (CPI) release, expected Wednesday afternoon. A softer-than-anticipated inflation reading could bolster expectations for more accommodative monetary policy, reigniting upward momentum in silver prices
Silver outshining gold
Unlike gold, which is traditionally viewed as a safe haven, silver carries a dual identity—valued both as a precious metal and as a key industrial input. The recent rally to a 13-year high has been driven in part by optimism around improving US-China trade relations, reducing fears of a global recession and boosting risk appetite. Silver’s role in industries such as solar energy, electronics, and electric vehicles strengthens its ties to global economic health, helping it outperform gold in recent weeks.
A notable indicator reflecting this trend is the gold-silver ratio, which has been declining—signalling silver’s growing appeal relative to gold.
Supply deficit drives prices higher
Approximately 70% of global silver supply is derived from mining, with only around 20% coming from recycled sources. Notably, pure silver mines contribute a relatively small share; much of the silver extracted is a byproduct of mining operations for other metals such as zinc, lead, copper, and gold. Consequently, silver production is heavily dependent on the fortunes of these markets.
The sector also faces a chronic underinvestment in mining exploration and development, partly due to increased regulatory hurdles. Simultaneously, infrastructure for recycling silver—particularly from electronic waste—remains underdeveloped, especially in the context of renewable energy applications.
This constrained supply environment is colliding with surging demand, particularly from the green technology sector. Silver plays an indispensable role in solar panel and electric vehicle production—segments expected to grow steadily in the coming years. With mining output lagging and inventories falling, silver is poised for a potential structural shortage, which should continue to push up prices.
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