Silver Extends Safe-Haven Rally as Fed Turmoil and Geopolitical Strains Lift XAG/USD

Key Moments

Spot Silver Holds Near Record Highs

Silver prices extend gains during early European trading on Tuesday.
XAG/USD hovers around $85.75 and remains firmly in positive territory.
Investors continue to favor safe-haven assets amid growing uncertainty.

In particular, concerns over the Federal Reserve’s independence and rising
geopolitical risks support demand. As a result, silver remains positioned
to retest its record high if bullish momentum holds.

Fed Independence Concerns Support Precious Metals

On Sunday, Federal Reserve Chair Jerome Powell said the US Department of
Justice issued subpoenas to the central bank. Prosecutors also threatened
criminal charges linked to Powell’s testimony last June on Fed building
renovations.

Powell described the legal threat as a pretext to pressure the Fed into
cutting interest rates. Consequently, institutional uncertainty continues
to lift demand for safe-haven assets such as silver.

“We see increased interference with the Fed as a key bullish wildcard for
precious metals in 2026,” said Julius Baer Group’s Carsten Menke. He added
that silver, due to its smaller market size, tends to react more sharply
to rate and dollar shifts.

Geopolitical Risks Add Support

In addition, geopolitical tensions continue to underpin silver prices.
Civil unrest in Iran has intensified, with reports of hundreds of deaths
during recent protests.

Iran’s foreign minister said security forces have regained control after
two weeks of unrest. However, he blamed the US and Israel for fueling the
protests. These developments add to risk aversion and support safe-haven
metals.

US CPI Data in Focus

Attention now turns to the US December Consumer Price Index (CPI) report,
due later on Tuesday. Traders look to the data for clues on the future
path of US interest rates.

A stronger-than-expected CPI reading could lift the US Dollar. In that
case, silver prices may face short-term pressure, as the metal is priced
in USD.

Silver Market Basics

Silver is a widely traded precious metal and has long served as a store
of value. Although gold often attracts more attention, silver remains a
popular diversification tool.

Investors also view silver as a potential hedge against inflation.
Market participants gain exposure through physical holdings, such as
coins and bars, or via exchange-traded funds that track silver prices.

Main Drivers of Silver Prices

Several factors influence silver prices. Periods of geopolitical stress
or economic uncertainty often push prices higher due to silver’s
safe-haven appeal.

As a non-yielding asset, silver typically benefits from lower interest
rates. Meanwhile, US Dollar movements remain critical. A firm dollar
can weigh on silver, while a weaker dollar tends to support gains.

Supply factors also matter. Mining output, recycling flows, and investment
demand interact with broader economic conditions to shape silver’s
medium- and long-term trend.

Industrial Demand and Regional Trends

Silver plays a key role in industrial applications, especially in
electronics and solar energy. Its high electrical conductivity supports
steady industrial demand.

Strong industrial activity can lift prices, while slowdowns may weigh
on demand. Economic trends in the US, China, and India are especially
important for the silver market.

Silver and Gold Relationship

Silver often follows gold’s price direction, as both serve as safe-haven
assets. When gold rises, silver frequently moves higher as well.

Traders also track the Gold/Silver ratio. A high ratio may suggest silver
is undervalued, while a low ratio can indicate relative overvaluation.