Silver Surges as Dollar Weakens and Safe-Haven Demand Rises

Silver prices jumped sharply on Monday, benefiting from a drop in the U.S. Dollar Index to its lowest level in a week, which boosted demand for precious metals. The move was further supported by reports suggesting that foreign investors may be shifting part of their dollar holdings into silver, following Chinese regulatory guidance asking financial institutions to reduce exposure to U.S. debt. This renewed questions about the status of U.S. assets as a safe haven.


Safe-Haven Demand Drives Silver Gains


Silver is thriving amid global uncertainty, whether due to geopolitical tensions in Iran, Ukraine, the Middle East, and Venezuela, or ongoing ambiguity over U.S. tariffs. The metal also benefits from growing bets on a weaker dollar, especially after U.S. President Donald Trump expressed approval of a softer currency, prompting investors to seek stores of value such as silver.


Political uncertainty in the United States, combined with a large fiscal deficit and unclear government policies, continues to support a shift toward precious metals at the expense of dollar-denominated assets.


High Liquidity Supports Silver Demand


The precious metal is further supported by abundant liquidity in the U.S. financial system. The Federal Reserve’s monthly injection of $40 billion into markets has fueled demand for assets seen as a reliable store of value.


Monetary Policy’s Impact on Silver


Silver experienced a sharp drop on January 30 after Kevin Warsh, considered one of the Fed’s more hawkish candidates, was nominated for the Federal Reserve chair. Markets interpreted this as reducing the likelihood of interest rate cuts, prompting broad selling across precious metals, including silver.


Investment Demand Remains Strong


Silver ETF holdings reached a 3.5-year high on December 23, before later falling to a 2.5-month low last week. Despite the recent liquidation, investment demand for silver remains robust, reflecting its continued appeal as a hedge amid global uncertainty.