The recent decline in the price of silver (XAG/USD) from $32.30 was attributed to investors’ concerns about the potential impact of Donald Trump’s protectionist policies on the global economy. Trump’s promises to raise tariffs could lead to inflationary pressures, prompting the Federal Reserve (Fed) to adopt a hawkish stance on interest rates, thus affecting the silver market.
Despite Trump’s victory, Fed Chair Jerome Powell does not foresee any immediate impact on the monetary policy, even after the recent interest rate cut to 4.50%-4.75%. The recovery of the US Dollar after Thursday’s correction also contributed to the decline in silver prices, with the US Dollar Index (DXY) rising to nearly 106.40.
Furthermore, the lack of a significant economic stimulus package from China also weighed on the silver market. China’s announcement of a 10 trillion yuan program to refinance local government debt was seen as insufficient to counteract the potential impact of Trump’s tariffs on the Chinese economy, leading to concerns about weak growth prospects that could impact the demand for silver.
Silver’s technical analysis shows a bearish trend, with the price dropping below the 50-day Exponential Moving Average (EMA) and finding support near the $29.00 level. The 14-day Relative Strength Index (RSI) is also nearing 40.00, indicating a potential bearish momentum if it falls below that threshold.
Investors interested in silver may consider diversifying their portfolio by adding physical silver in the form of coins or bars, or through Exchange Traded Funds (ETFs) that track its price on international markets. Silver prices can be influenced by various factors such as geopolitical instability, interest rates, US Dollar performance, industrial demand, and economic developments in key markets like the US, China, and India.
Silver’s correlation with gold prices is significant, as both metals are considered safe-haven assets. The Gold/Silver ratio, which indicates the relative valuation between the two metals, can help investors determine whether silver is undervalued or overvalued compared to gold. Overall, silver remains a popular choice among investors looking to hedge against inflation or diversify their investment portfolio.
