Increased volatility in prices: USD price adjustments and the clash of complex market factors

Recent Price Adjustment Background and Market Signals

This week, during Asian trading hours, silver(XAG/USD) experienced notable volatility. It declined from a high of $84.03 to $75.00, a drop of about $11, reflecting more than just technical correction and indicating changes in the global macro environment. News of progress in peace negotiations between Russia and Ukraine has weakened investors’ risk aversion sentiment, leading to supply-demand imbalances in safe-haven assets like silver.

Dual Effects of Easing Geopolitical Tensions

Recent talks between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky suggest significant progress toward peace agreements. However, structural issues such as territorial disputes and the future operation of the Zaporizhzhia nuclear power plant remain unresolved. While these factors have reduced safe-haven asset preferences, they also foster expectations for long-term economic stability.

China’s Reorganization of Silver Supply Chain Strategy

The announcement that China plans to overhaul its silver export system starting January 1, 2026, is causing considerable ripple effects in the global market. The measure restricts silver exports to only large, government-licensed approved companies, effectively blocking small exporters from entering the market.

Industry insiders are voicing concerns over this move. Since silver is a key raw material for advanced industries such as semiconductors, solar energy, and medical devices, supply constraints could lead to increased industrial demand. As a result, a global silver shortage may intensify, potentially supporting prices.

U.S. Federal Reserve’s Interest Rate Path and Silver Market Relationship

The Federal Reserve(Fed)'s monetary policy outlook for 2026 is a crucial variable for silver investors. According to the latest data from CME FedWatch, the probability that the Fed will implement at least a 50bp rate cut is 73.3%. This environment of low interest rates could promote capital flows from dollar-denominated assets to commodities like silver.

However, the Fed’s dot plot(Dot Plot) projecting the federal funds rate at 3.4% by the end of 2026 reveals a disconnect with market expectations. It suggests only one rate cut might occur, indicating ongoing differences in perceptions between the Fed and market participants.

USD Price Movements and Silver Correlation

The relative weakness of the dollar enhances the attractiveness of dollar-denominated assets like silver. Weakening of key USD indicators has historically shown an inverse correlation with precious metals prices, and in the current dollar weakness phase, silver is testing its technical resilience.

Future Outlook: Opportunities Amid Mixed Signals

In the short term, a correction phase driven by easing geopolitical tensions may continue. However, from a medium- to long-term perspective, structural positive factors are accumulating, including China’s supply restrictions, gradual Fed rate cuts, and rising industrial demand. The growth of advanced technology industries and increased industrial silver consumption are expected to provide price support.

Over the coming months, silver prices are likely to oscillate within these complex factors. If supply tensions in the spot silver market intensify and the USD remains weak, silver prices could have substantial upside potential.