## Silver and Market Speculations Silver’s price has dropped sharply from its peak of $93.51 to about $86.50. This decline happened after Iran announced it would stop violence against protesters, which lowered the need for safe-haven assets. The market atmosphere is tense, as US President Trump continues to warn about possible military action in Iran. Iran’s recent promises have eased fears of an immediate US response. At the same time, speculation that the Federal Reserve might not change interest rates in their next meeting is impacting Silver’s attractiveness. This speculation grew after firm US Consumer Price Index (CPI) data was released. Looking forward, the upcoming announcement regarding the new Federal Reserve Chair could influence the market. Possible candidates for this role include Kevin Hassett, Kevin Warsh, Christopher Waller, and Michelle Bowman. Technical analysis shows that XAG/USD has dropped to around $88.50, but it remains above the 20-day Exponential Moving Average of $77.48, suggesting an upward trend. ## Silver and Geopolitical Factors Silver is still a strong investment option because of its long-standing value and role as a hedge. Many factors, such as geopolitical events, interest rates, and industrial demand, affect Silver’s price. The connection between Silver and Gold prices often reflects how the market sees safe-haven assets. A high Gold/Silver ratio may indicate that Silver is undervalued. We recall that last year, Silver prices fell significantly from the record highs above $93. This was due to a reduction in the crisis with Iran, which had previously increased safe-haven buying. Now, the market is different, and prices are much lower. While the major confrontation in 2025 has passed, geopolitical risks still exist, providing some support for Silver prices. However, the extreme fear that pushed prices to all-time highs is no longer the main driving force in the market. We view this as a background factor rather than an immediate cause. Our main concern now is the Federal Reserve’s policies under Chairman Kevin Warsh, who succeeded Jerome Powell last year. The most recent CPI data for December 2025 shows inflation staying high at 2.8%, which has reduced expectations for further interest rate cuts. This prolonged period of high rates makes holding non-yielding assets like Silver less appealing. Adding to this pressure is Silver’s industrial demand. The latest Global Manufacturing PMI report showed a decline to 49.6, hinting at a slight drop in factory activity. This suggests that demand from industries like electronics and solar energy may weaken in the coming months. In this scenario of lower geopolitical fear and a stern Fed, traders might consider strategies that take advantage of price stability or provide protection against further declines. Selling out-of-the-money call options while holding a core position could yield income, benefiting from the current low upward momentum. This strategy, known as a covered call, works well when large price increases are not anticipated. For those worried about a possible drop in price, buying protective puts could serve as a simple hedge. If prices break below the important level of $75, it could lead to additional selling. Puts with a strike price around $73 would provide a shield against such a move. This strategy is especially relevant before the next Fed policy meeting at the end of the month. Create your live VT Markets account and start trading now.

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