By Rania Gule, Senior Market Analyst at XS.com – MENA
Silver has witnessed dramatic moves in recent days, reflecting the sensitivity of this dual-natured metal—both investment and industrial—to political and monetary shocks at the same time. Following the announcement of a 15% global tariff by the U.S. president, prices surged by more than 6% in a single session, driven by strong safe-haven demand, before quickly retreating from the $89 level to around $87.87 as momentum faded and traders shifted toward profit-taking. In my view, what happened does not represent a trend reversal as much as it reflects a rapid repricing of a sudden political shock, followed by the natural behavior of markets that tend to test extremes before stabilizing new positions.
The sharp rally was not surprising. Trade escalation typically revives investor appetite for hedging assets, particularly in a global environment marked by slowing growth and rising geopolitical polarization. However, silver differs from gold in that it is more sensitive to the economic cycle, given its close link to industrial demand. Therefore, while a trade shock that heightens concerns about supply chains may support prices in the short term through safe-haven flows, it simultaneously raises questions about the outlook for global industrial activity in the medium term. This contradiction partly explains the swift transition from aggressive buying to organized profit-taking.
From a deeper perspective, I believe the recent pullback also reflects the market’s realization that the 15% tariff—despite its political symbolism—will not by itself alter the structural supply-demand dynamics of the silver market. According to estimates by the Silver Institute and Metals Focus, the market is projected to record a supply deficit ranging between 67 and 120 million ounces in 2026, marking the sixth consecutive year of deficit. These figures are far from marginal; they provide a solid medium-term floor for prices, especially amid rising demand from AI data centers, electric vehicles, and semiconductor manufacturing—sectors whose structural momentum is unlikely to slow meaningfully even in the face of escalating trade tensions.
In my assessment, silver is transitioning from a news-driven market to a fundamentals-driven one. The initial surge toward $89 was an immediate reaction to an urgent political catalyst, but the path ahead will be shaped by a more complex mix of monetary policy, inflation expectations, and U.S. dollar dynamics. Current expectations suggest that the Federal Reserve will keep interest rates unchanged in March, with markets pricing in roughly 60 basis points of easing over the remainder of the year. If this scenario materializes, the monetary backdrop would become increasingly supportive for precious metals, including silver, as the opportunity cost of holding non-yielding assets declines.
That said, speculation should not be overlooked. U.S. Treasury Secretary Scott Bessent attributed part of the recent sharp volatility to speculative activity by Chinese traders. Whether one agrees with that assessment or not, the statement underscores the role of short-term liquidity in amplifying price swings. In my opinion, what we are witnessing is not a price bubble, but rather a speculative cycle unfolding within a broader upward trend, where investment flows interact with the narrative of persistent supply deficits and accelerating industrial demand.
Upcoming U.S. economic data—most notably the jobs report and the Consumer Price Index—will be crucial in shaping the short-term trajectory. A higher-than-expected inflation reading could reprice rate expectations and temporarily pressure silver through a stronger dollar, while weaker data could reinforce easing bets and push prices toward new highs. Nevertheless, I believe any downside correction will remain limited as long as deficit projections hold and the global transition toward a digital and electrified economy—one that consumes increasing amounts of silver—continues.
In conclusion, silver has not lost its luster; it is simply recalibrating. The tariff shock was the spark, but the real fuel lies in the structural supply deficit and accelerating industrial demand. Current volatility is natural in a market reacting to major political developments, yet it does not negate the broader upward trend unless there is a fundamental shift in monetary policy or a sudden collapse in global industrial demand. Therefore, I expect silver to remain supported in the medium term, with the potential to trade above $90 in the coming months if monetary easing expectations align with continued supply constraints. In an increasingly uncertain world, silver remains an asset that combines hedging and growth characteristics—and it is this dual advantage that, in my view, will sustain its appeal in the next phase.