Silver (XAG/USD) remains resilient, sustaining its recent bullish momentum as it trades near $31.30 during Friday’s Asian session. The precious metal is on track for a third consecutive daily gain, driven by a combination of safe-haven demand, a weaker US Dollar, and increased speculation around monetary policy easing by the Federal Reserve.
With geopolitical concerns intensifying and macroeconomic indicators pointing toward economic moderation, the environment is becoming increasingly favorable for Silver bulls. An in-depth look at the topic is provided by the professionals at Raliplen.
Weakening US Dollar Supports Silver
One of the key factors underpinning Silver’s strength is the persistent weakness in the US Dollar Index (DXY), which is currently trading around 100.20. The dollar’s decline reflects a shift in market sentiment as traders react to softer inflation data and the growing possibility of Federal Reserve rate cuts.
A weaker dollar makes dollar-denominated assets like Silver more attractive to non-US investors, effectively boosting demand and placing upward pressure on the metal’s price.
The inverse relationship between Silver and the US Dollar continues to be a driving dynamic. As the DXY softens, Silver benefits from an improved relative value proposition, enhancing its role as a hedge against currency depreciation and global volatility.
Rising US-China Trade Tensions Spark Safe-Haven Inflows
The recent surge in Silver prices is also being fueled by escalating trade tensions between the United States and China, which have significantly heightened investor uncertainty.
On Thursday, the US government announced an aggressive tariff hike on Chinese goods–raising tariffs to 145%, incorporating a new 125% levy on top of an existing 20% duty. This abrupt escalation has intensified fears of a renewed trade war, reminiscent of the friction observed in 2018-2019.
While the US President opted for a 90-day tariff pause for other countries, the specific targeting of Chinese imports has overshadowed this concession. The prospect of retaliatory measures from Beijing and potential disruptions to global trade flows have prompted investors to seek refuge in traditional safe-haven assets such as Silver, alongside Gold and US Treasuries.
Historically, periods of geopolitical stress and economic policy uncertainty have amplified demand for Silver, not only as a monetary metal but also due to its dual role in industrial applications. In this context, Silver’s appeal lies in its ability to hedge both systemic risks and inflationary shocks, especially during times when markets are grappling with deteriorating confidence and volatile global dynamics.
Softer US Inflation Data Reinforces Fed Dovish Tilt
Recent inflation figures released by the US Bureau of Labor Statistics have reinforced the market’s expectation of a monetary policy pivot by the Federal Reserve. The March Consumer Price Index (CPI) revealed a notable cooling in inflationary pressures:
- Headline CPI dropped to 2.4% YoY, undercutting the 2.6% consensus forecast and down from 2.8% in February.
- Core CPI (excluding volatile food and energy components) rose just 2.8%, also below expectations.
- Every month, headline CPI contracted by 0.1%, while core CPI advanced by only 0.1%.
This data has significantly altered market pricing for Fed policy. According to the latest futures markets, traders are now assigning a high probability of a rate cut in June, with as much as 100 basis points in total cuts projected by the end of 2025. Lower interest rates typically support non-yielding assets like Silver, as the opportunity cost of holding precious metals diminishes.
Fed Commentary Reflects Caution Amid Policy Crosscurrents
The Federal Open Market Committee (FOMC) minutes, released earlier this week, indicate growing concerns among Fed officials regarding the trade-off between inflation control and economic growth. While inflation has cooled modestly, the persistence of core price pressures, combined with deteriorating employment signals, places the Fed in a difficult position.
Dallas Fed President Lorie Logan cautioned that unexpected trade developments could spur both inflation and job losses, possibly necessitating a more defensive monetary stance. Her remarks underscore the growing fragility of the US economy as it navigates both external headwinds and domestic policy dilemmas.
Adding to the mix, the latest weekly jobless claims edged higher to 223,000, suggesting a potential cooling in the labor market–another signal that could prompt the Fed to begin easing.
Outlook: Silver Likely to Remain Supported
In the current macroeconomic and geopolitical environment, Silver is poised to remain well-supported in the near term.
From a technical standpoint, Silver appears to have established a solid footing above the $31.00 support zone, with momentum indicators suggesting continued bullish bias. A sustained break above $31.50 could open the door for a retest of multi-year highs, particularly if the Fed confirms a dovish trajectory at its next policy meeting.
In conclusion, as long as economic uncertainty lingers and the Fed maintains a dovish posture, Silver’s upside potential remains compelling–both as a safe-haven asset and as a strategic inflation hedge.
COMTEX_465112176/2922/2025-05-01T11:52:05
