Silver prices (XAG/USD) remain stable around $33.80 per troy ounce after a period of decline, amid pressures following the Federal Reserve’s interest rate decision to maintain the federal funds rate at 4.25%–4.5%. The Fed’s outlook suggests two rate cuts later this year, influenced by predictions of slower GDP growth and increased unemployment.

The decline in US Treasury yields, with the 2-year yield at 3.97% and the 10-year yield at 4.24%, has supported silver. Additionally, silver lease rates have increased as stockpiles diminish, particularly in London, with fluctuations in market prices due to tariffs affecting physical silver transfers.

Silver has gained 17% this year, surpassing other commodities, alongside tightening supply as tariffs strain transfers from Canada and Mexico. The potential for a “silver squeeze” adds uncertainty to trade dynamics.

The metal is a well-regarded investment option, often used for diversification and as a hedge against inflation. Silver prices can react to numerous factors, including geopolitical instability, recession fears, and movements in the US dollar, as the asset is dollar-priced.

Industry demand, especially in electronics and solar energy, also affects pricing. The dynamics of the US, Chinese, and Indian economies play a role: industrial demand in the US and China, and consumer demand for jewelry in India are significant influences.

Silver typically follows gold trends due to their similar safe-haven status. The gold/silver ratio can help investors assess the valuation dynamics between the two precious metals, indicating potential undervaluation or overvaluation.

With silver’s price holding steady near $33.80 per troy ounce—following a stretch of losses—the Federal Reserve’s decision to keep the federal funds rate between 4.25% and 4.5% plays no small part in the current market sentiment. The Fed’s projection of two rate cuts later in the year is based on expectations of slower GDP growth and rising unemployment, both of which are key indicators that traders watch closely.

The decline in US Treasury yields has provided some tailwind for silver. The 2-year yield has fallen to 3.97% while the 10-year sits at 4.24%, both reflecting shifting investor sentiment towards fixed income. Lower yields typically make non-yielding assets such as silver relatively more attractive, which explains part of the metal’s resilience despite previous selling pressure.

Beyond bond markets, there is a marked tightening of silver supply. Lease rates have increased as available stockpiles, particularly in London, continue to shrink. Supply-side constraints, including disruptions from tariffs impacting physical transfers, introduce sporadic volatility into pricing. With Canada and Mexico key contributors to silver flows, any barriers to movement add further strain. It is no surprise that silver has outpaced other commodities this year, rising by 17%.

The possibility of a “silver squeeze,” where demand outpaces supply in a way that forces sharp price adjustments, remains an unpredictable factor that traders cannot disregard. While speculative forces can drive short-term moves, those with an eye on fundamentals should also consider broader economic drivers.

Silver’s reputation as a hedge against inflation and a tool for portfolio diversification remains intact. The metal’s sensitivity to geopolitical uncertainty, recessionary risks, and shifts in the US dollar lends itself to periods of heightened volatility. Since silver is priced in US dollars, any strength or weakness in the currency can directly influence valuations.

Beyond investment demand, industrial usage plays a growing role, particularly in sectors such as electronics and solar energy. Economic developments in the US, China, and India remain key to understanding overall demand. China and the US contribute heavily through industrial applications, while India’s consumer market, particularly for jewellery, provides a separate pillar of support.

Additionally, silver tends to follow gold’s broader movements due to their overlapping safe-haven status. The gold/silver ratio serves as a useful gauge in measuring whether silver is undervalued or stretched in comparison to its counterpart, giving traders another data point when assessing potential positioning.