Silver's performance has continued to outpace gold this year, positioning itself as the preferred "hedge asset" for investors, with prices on track for a tenth straight monthly increase. This would mark the longest recorded streak of consecutive monthly gains.

As of Thursday, spot silver was hovering around $88.90 per ounce, having climbed approximately 4.3% so far this month.

An escalation in trade tensions typically reignites investor demand for hedging assets, particularly against a backdrop of slowing global economic growth and intensifying geopolitical polarization, according to a senior market analyst.

The analyst noted that while trade risks could slow economic growth and weaken demand for silver, silver is a "dual-nature metal," possessing both investment appeal and industrial utility. This is a key reason it is increasingly viewed as the primary hedging instrument over gold recently.

Silver differs from gold in that it is more sensitive to economic cycles due to its close ties to industrial demand, the analyst explained. They also pointed out that while trade shocks may support prices in the short term via safe-haven inflows, they simultaneously raise concerns about the outlook for global industrial activity in the medium term.

This dynamic partly explains why the market can shift "rapidly from aggressive buying to orderly profit-taking," the analyst suggested.

Echoing this sentiment, the CEO and asset manager of DHF Capital stated on Wednesday that trade risks and geopolitical tensions are underpinning the silver market.

Recent developments, including temporary global tariffs and discussions of potential rate increases, have "rekindled fears of a renewed escalation in trade confrontations, driving capital towards safe-haven assets," he said.

Meanwhile, persistent tensions in Eastern Europe and security concerns in Mexico are also enhancing the appeal of precious metals. Investors are also closely monitoring the upcoming third round of US-Iran nuclear talks in Geneva, as any breakdown could reignite regional instability, he added.

"Amid increasing global uncertainties, silver stands to benefit significantly," he concluded.

However, it is important to note that forecasts from the Silver Institute and Metals Focus project a supply deficit in the global silver market this year. They anticipate a deficit of 67 million ounces by 2026, which would be the sixth consecutive year of shortfall.

This projected deficit is "far from insignificant" and provides a solid medium-term floor for prices, especially given rising demand from sectors like AI data centers, electric vehicles, and semiconductor manufacturing, the analyst stated. The "structural momentum" from these areas is unlikely to slow markedly, even if trade tensions intensify.

The analyst remarked that silver is transitioning "from a news-driven market to one driven by fundamentals." Future price movements will be "shaped by a more complex interplay of factors," including monetary policy, inflation expectations, and US dollar dynamics.

Current expectations suggest the Federal Reserve will hold rates steady in March, with market pricing indicating about 60 basis points of cuts for the remainder of the year. If this scenario materializes, the monetary environment would become "increasingly favorable for precious metals, including silver, as the opportunity cost of holding non-yielding assets declines," the analyst said.

Regarding recent extreme volatility, the analyst acknowledged that speculative activity, sometimes attributed to Asian traders, is a factor that cannot be ignored, as it "highlights the role short-term liquidity plays in amplifying price swings."

The analyst believes the current market is not experiencing a price bubble but is rather in a "speculative cycle" unfolding against a broader backdrop of persistent supply deficits and rising industrial demand.

In summary, the analyst concluded that silver "has not lost its luster; it is merely recalibrating." The current volatility is "natural" for a market reacting to significant political events and does not negate the overall upward trend, barring a fundamental shift in monetary policy or a sudden collapse in global industrial demand.