Silver prices are increasing as more investors seek safe havens because of fears the US government might shut down. Currently, the price of silver is around $108.90. Traders are being cautious because of uncertainties with the Federal Reserve and possible trade tensions. The US government might face a shutdown, as Senate leader Chuck Schumer disagrees with the funding plan and a deadline is approaching. President Trump plans to announce a new nominee for Fed Chair, which has some people speculating about possible interest rate changes that could influence precious metals. Trump has also warned about raising tariffs on South Korean goods and imposing a potential 100% tariff on Canadian products if a trade deal with China is pursued. As concerns about fiscal issues grow, more investors are interested in silver, especially amid a decrease in bond and currency values. Silver is a favored investment for those looking to diversify or hedge against inflation. Investors can buy physical silver or invest through ETFs. Many factors affect silver prices, including political instability and the strength of the US dollar. Silver is used in electronics and solar energy, which means its price can change with industrial demand. Often, silver’s price follows gold, and the Gold/Silver ratio can indicate how the two metals are valued relative to each other. Looking back to this time in 2025, silver prices surged to around $109 an ounce, driven by a combination of uncertainty. Concerns about a US government shutdown, aggressive trade talk, and speculation about significant interest rate cuts from the Federal Reserve boosted the demand for safe-haven investments. However, many of these pressures have eased since then. Today’s political scene is much calmer than it was in January 2025. The feared shutdown did not happen, and Congress passed a bipartisan budget resolution in late 2025, which lowered the fiscal risks that were once headline news. This stability has reduced the urgent demand for precious metals that we saw before. The Federal Reserve’s approach has also changed from last year’s discussions about aggressive rate cuts. After several cuts throughout 2025, the recent Consumer Price Index showed inflation rising to 2.8%, which led the Fed to indicate a pause. The possibility of maintaining higher interest rates for a longer time makes holding non-yielding assets like silver less appealing. Global trade tensions have also lessened, which removes another reason behind the 2025 silver rally. The threats to impose tariffs on South Korea and Canada have been replaced with positive negotiations, and the US has established new trade agreements in the Pacific region. This more stable environment lessens the need for traders to protect themselves against trade risks. With the intense fear from 2025 fading, silver prices have corrected and stabilized well below the highs of the past. Now that implied volatility is lower, traders in derivatives should think about strategies that benefit from stable price ranges, like selling out-of-the-money call options. This strategy lets traders earn premiums since it’s unlikely that silver will reach its previous peaks without a new major reason. Yet, we must consider the strong demand from industrial uses that helps support prices. A recent report by the International Energy Agency predicts a 20% increase in silver use for solar panel production in 2026. This strong demand indicates that while speculative enthusiasm might have cooled, taking short positions could be risky, as industrial demand for silver is stronger than ever.

here to set up a live account on VT Markets now