Silver prices fell sharply as geopolitical tensions decreased, leading to lower demand for safe-haven assets. The outlook for US monetary policy also remains restrictive, adding more pressure on precious metals like silver. Currently, silver is trading at about $89.70, down 2.50%. This drop reflects a market that favors riskier assets, reducing silver’s appeal as a safe haven. The recent decline in silver prices is tied to easing geopolitical tensions. US President Donald Trump’s remarks about stepping back from military action have calmed investors’ concerns, prompting a shift toward riskier investments. Additionally, Trump’s backing of Federal Reserve Chair Jerome Powell has eased worries about the central bank’s independence. The lack of new tariffs is also helping to lower trade tensions. Silver is further pressured by high US interest rates, with employment data suggesting that a tight monetary policy will last. In this environment, assets like silver, which do not earn interest, are less attractive compared to bonds. The market is closely watching geopolitical events and announcements from the Federal Reserve that could affect precious metals. Last year, silver prices dropped significantly as geopolitical fears eased, and the Fed indicated higher rates for a longer period. The current situation in January 2026 looks quite different, implying a potential change in strategy—a good opportunity to reassess positions. In contrast to strong employment data from last year, the latest Consumer Price Index (CPI) for December 2025 came in at a gentler 2.8%. This has raised expectations for further Fed rate cuts this year. With the Federal Reserve now easing policy, the cost of holding non-yielding silver is decreasing, making call options and long futures positions more appealing than in most of 2025. We are also seeing stronger industrial demand compared to last year. Global data for Q4 2025 showed a 15% year-over-year increase in solar panel installations, with this trend expected to accelerate in 2026 due to new green energy policies. This strong demand offers significant support for silver prices, independent of monetary policy effects. The Gold/Silver ratio is another important indicator, currently near 85. This is historically high and suggests silver is undervalued compared to gold, similar to conditions before the 2025 rally. Traders may consider strategies that benefit from a narrowing of this ratio, such as buying silver futures while shorting gold futures. While early 2025 saw easing tensions, we are now observing renewed naval activity in the South China Sea. This uncertainty is increasing demand for safe-haven assets, a factor that was missing during last year’s correction. For derivative traders, this indicates we should be ready for higher implied volatility in the upcoming weeks.

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