Silver (XAGUSD) is up by about 40% year-to-date and approaching $100 for the first time, boosted by heavy demand from Chinese investors and a weak U.S. dollar.
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Silver prices in China trade at a premium of more than $12 per troy ounce compared to prices in London. However, that could potentially backfire and result in a shift back to gold, according to Saxo Bank Head of Commodity Strategy Ole Hansen. “The risk of demand destruction cannot be ignored if prices accelerate too far, too fast—a dynamic that could eventually favor a rotation back toward gold,” he said.
Dollar Dip and Trump’s Tariff Threat Lift Silver
The U.S. dollar index, which measures the dollar’s value against a basket of six major currencies, is down by 1.1% over the past week. That benefits silver because a weaker dollar makes silver cheaper for holders of other currencies.
Earlier this week, President Trump threatened to tariff eight European countries until the U.S. secured a deal for Greenland. Silver tends to rise during periods of geopolitical uncertainty because it is viewed by investors as a store of value. While Trump later pulled back the tariffs, the unpredictability of U.S. policies has raised concerns among investors, keeping demand for silver high.