Silver prices have experienced a significant increase, approaching $30.40, driven by escalating trade tensions between the United States and China, which have exerted downward pressure on the US Dollar. The limited availability of readily substitutable Chinese goods is anticipated to contribute to inflationary pressures within the US economy. Concurrently, expectations of a dovish monetary policy stance by the Federal Reserve have intensified amid concerns of a potential US recession.
XAG/USD has risen approximately 2% to near $30.40 during the European trading session. This appreciation is attributed to the weakening US Dollar, fueled by anxieties that the intensifying trade dispute between Washington and Beijing could precipitate an economic downturn in the United States. The US Dollar Index (DXY) has declined to approximately 102.00. Market participants are apprehensive that the imposition of substantial tariffs on Chinese imports, coupled with retaliatory measures, will impede the procurement of Chinese goods by US companies. This scenario is projected to be inflationary and potentially impede US economic growth due to the limited availability of domestic alternatives for Chinese imports.
Furthermore, market sentiment suggests an increased likelihood of a more accommodative monetary policy from the Federal Reserve in response to potential economic shocks. According to the CME FedWatch tool, the probability of a Federal Reserve interest rate reduction at the May meeting has risen considerably from 10.6% to 52.5% within the past week. Lower interest rates are generally considered favorable for non-yielding assets such as silver.
