Silver price hits record highs on Fed uncertainty, geopolitics and AI-driven demand

US dollar weakness supports silver prices

Weakness in the USDOLLAR has been a key driver of silver's rally, amid broader dedollarisation and debasement trends linked to ballooning global deficits and other factors. Eroding confidence in the greenback has intensified this week due to concerns over political interference in Federal Reserve policy. The central bank has received Department of Justice subpoenas, which Chair Powell himself linked to rate decisions and the Fed's independence. ^[1]

Market pricing for additional rate cuts this year has added to the dollar's challenges, as President Trump is expected to announce his pick for Powell's successor relatively soon. The next Fed Chair could be more closely aligned with the President's preference for lower borrowing costs.

Nonetheless, the Fed may struggle to deliver aggressive easing this year. Its latest projections from December point to just one additional rate cut ^[2]. Despite easing price pressures, as shown in Tuesday's CPI report, inflation remains well above the 2% target and macroeconomic uncertainty remains elevated.

Geopolitical tensions drive safe-haven demand for silver

Silver has also been supported by safe-haven flows amid heightened geopolitical uncertainty, following a US military operation in Venezuela that led to the arrest of Maduro. President Trump has since shifted focus to escalating protests in Iran and to Greenland's critical minerals and strategic importance.

He stated that "the military is looking" at the situation in Iran and that the administration is examining some "very strong options" ^[3]. This was followed by a post on Tuesday urging Iranians to continue protesting and suggesting that help was on the way ^[4]. President Trump has also reiterated his position on Greenland, stating that the US will acquire it "one way or the other", and stressing that Washington would not allow the territory to fall into the hands of Russia or China. ^[3]

However, further military operations in either case would be complex and carry significant risks, potentially prompting a more cautious approach and limiting risk-off flows. While the US has already struck Iran's nuclear facilities, another operation could galvanise the regime. Greenland, meanwhile, is part of NATO.

AI, cleantech and defence underpin long-term silver demand

While dollar weakness and safe-haven demand are supporting prices, the rally rests on a more solid foundation. Structural demand is being driven by silver's use in vital sectors underpinning the global economy. Highlighting its strategic importance, the US Geological Survey recently added silver to its critical minerals list ^[5]. The Silver Institute expects industrial demand to remain strong due to its use in these technologies ^[6], while potential US Section 232 duties on the metal could tighten the market.

Silver is indispensable to the expansion of artificial intelligence and the data centre build-out required to support it, as technology companies continue to invest heavily in this transformative field. The metal is also essential to the clean energy transition, including photovoltaics and electric vehicles. In addition, silver plays a key role in the defence industry, as military budgets rise amid geopolitical uncertainty. This shift is underscored by NATO's commitment to increase investment ^[7] and by President Trump's pledge to raise defence spending to $1.5 trillion. ^[8]

That said, supply and demand dynamics remain somewhat mixed. The Silver Institute expects overall demand to have declined last year, while supply remained relatively stable ^[9] -trends that could persist into 2026. Disruptive trade policies and macroeconomic uncertainty may dampen silver consumption, while risks to the AI boom remain. At the same time, the United States under President Trump is prioritising fossil fuels and rolling back green energy policies.

XAG/USD outlook: technical and fundamental drivers

Silver has reached new all-time highs on the back of USDOLLAR weakness and geopolitical tensions, both of which may continue to provide support. These factors reinforce a compelling structural narrative based on silver's deep links to AI, cleantech and defence, which could propel XAG/USD to further record highs and underpin longer-term strength.

Conversely, trade frictions, uneven industrial activity amid macroeconomic uncertainty, risks to AI deployment and challenges to the clean energy transition could weigh on demand and limit further gains. From a technical perspective, the Relative Strength Index (RSI) has not followed the metal's price higher, in a divergence that creates scope for pullbacks, even though the broader bullish momentum is hard to dispute.