Silver price (XAG/USD) continues to lose ground for the second straight day, hovering around $32.80 per troy during Asian trading hours on Monday. The precious metal faces pressure as improving trade relations between the United States (US) and China diminish its safe-haven appeal.
On Friday, reports indicated that China had exempted certain US imports from its steep 125% tariffs, raising hopes that the long-running trade dispute between the world’s two largest economies could be nearing a resolution. Further boosting sentiment, US Agriculture Secretary Brooke Rollins said on Sunday, according to Reuters, that the Trump administration is holding daily discussions with China on tariffs.
However, conflicting signals persist. Reuters cited a Chinese embassy spokesperson on Friday, who firmly denied any ongoing negotiations, stating, "China and the US are not having any consultation or negotiation on tariffs." The spokesperson also urged Washington to "stop creating confusion." In addition, a Beijing official reiterated on Thursday that no "economic and trade negotiations" are underway and emphasized that the US must "completely cancel all unilateral tariff measures" to reopen talks.
Meanwhile, the US Dollar (USD) strengthened, weighing further on dollar-denominated commodities like Silver. The US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, rose for the second consecutive session, trading near 99.70 at the time of writing. The Federal Reserve (Fed) remains in a blackout period ahead of its May 7 Federal Open Market Committee (FOMC) meeting.
Looking ahead, traders are focused on several major US economic releases this week, including the preliminary Q1 GDP report, March PCE inflation figures, and April jobs data. These indicators could provide critical clues about the Fed's next policy moves and the broader economic outlook.
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.