Financial markets reacted with noticeable relief to the recent announcement of a temporary trade agreement between the US and China. While gold, the traditional safe haven, experienced a significant setback immediately after the news, silver showed a remarkable, partly divergent price development. This different reaction highlights the complex nature of the silver market, which is influenced by both monetary and industrial factors, and brings the gold-silver ratio back into the focus of investors.
The US-China Agreement and Its Immediate Market Effects
The agreement, which provides for a reduction of US tariffs on Chinese imports from 145% to 30% and Chinese tariffs on US goods from 125% to 10% for a period of 90 days, triggered an immediate “risk-on” sentiment in global markets. Investors shifted capital from safe-haven assets like gold to riskier stocks. The Dow Jones Industrial Average recorded an increase of 400 points, and the Nasdaq gained 4%, reflecting the newly gained confidence in global trade stability.
As a result, gold prices fell by around 100 US dollars or 3%. At the same time, the US Dollar Index (DXY) appreciated by 1.16% to 101.76 points, the highest level in over a month. A stronger dollar typically makes gold more expensive for investors outside the dollar zone, thus dampening demand. Technical analysis also showed that gold futures broke through important support levels, indicating a short-term bearish momentum.
Silver’s Surprising Resilience
In contrast to gold, the silver price fell only slightly by 0.37% to 32.87 US dollars per ounce. This relative strength led to a narrowing of the gold-silver ratio to 99.33:1. The diverging development underscores silver’s dual role: It is not only a monetary metal but also an important industrial raw material. The prospect of reduced trade barriers nurtured expectations of increasing industrial demand, particularly from sectors such as electronics and solar energy, which account for about 60% of annual silver consumption.
The easing of tariffs improves supply chain efficiency for silver-dependent industries. Analysts forecast an 8% growth in industrial silver demand for 2025. Silver’s excellent conductivity and antibacterial properties make it indispensable for the expansion of 5G infrastructure and for medical devices – sectors likely to benefit from the relaxed trade relations between the US and China. The London Bullion Market Association (LBMA) expects a supply deficit of 500 tons of silver by 2026, driven by the expansion of green energies, which could support prices in the long term, despite short-term volatility.
From a technical perspective, silver managed to defend its support at 32.50 US dollars, a level that was tested twice in the first quarter of 2025. Since the end of 2024, silver has been trading steadily above 30 US dollars, supported by diversification strategies of central banks and inflows from private investors.
The Gold-Silver Ratio in Focus
The decline of the gold-silver ratio below the 100:1 mark represents a significant change compared to the average of 110:1 in 2024. Historically, the ratio averaged about 60:1 in the period from 1900 to 2020, suggesting room for further decline in favor of silver. Silver’s industrial applications position it favorably to outperform gold in a scenario of trade normalization. This was already evident in 2010-2011, when the ratio fell from 65:1 to 32:1 during quantitative easing.
Silver’s dual demand structure – both as a precious metal and an industrial metal – creates its own market dynamics that can lead to outperformance in phases of economic optimism. A narrowing ratio tends to argue for a stronger commitment to silver. For example, the iShares Silver Trust (SLV) recorded inflows of 1.2 billion US dollars in the first quarter of 2025, while the SPDR Gold Trust (GLD) had to accept outflows of 800 million US dollars.
Outlook: Which Factors Influence Further Development?
The future development of precious metal prices will largely depend on upcoming economic data and monetary policy decisions by central banks. The release of US consumer price data (CPI) expected today, May 13, 2025, will be closely watched. An anticipated decline in the annual inflation rate could reinforce the Federal Reserve’s dovish stance, thereby supporting non-interest-bearing assets like gold and silver. Retail sales figures and Fed Chairman Powell’s speech at the Jackson Hole symposium in August will also provide important indications.
Moreover, potential interest rate cuts by the European Central Bank (ECB) in June 2025 could weaken the euro and, in turn, strengthen the dollar, which could put pressure on precious metal prices. On the other hand, China’s projected GDP growth of 4.9% supports the demand for industrial metals and thus also silver.
Conclusion for Investors
The recent trade agreement between the US and China has clearly highlighted the different drivers for gold and silver. While gold, as a classic safe haven, came under pressure with increasing risk appetite, silver benefited from improved prospects for industrial demand. The shift in the gold-silver ratio indicates a relative strength of silver. Investors should closely monitor the further development of trade relations, global economic data, and central bank monetary policies to accurately assess the opportunities and risks in the precious metals sector. The dual nature of silver as both an investment and industrial metal could continue to provide interesting investment opportunities in an environment of economic recovery and technological progress.
