Silver Returns To Highs As US Dollar Continues To Weaken
Silver (XAG/USD) prices returned to a more than one-month high of $30.95 during the European session on Wednesday (1/22). The white metal strengthened as the US Dollar (USD) continued to weaken due to the less worrisome tariff plan announced by US President Donald Trump in the first two days of his administration.
The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, returned to a two-week low of 107.80. A lower US Dollar makes Silver cheaper for investors. The 10-year US Treasury yield fell to near 4.57%.
Trump has announced 25% tariffs on Mexico and Canada and is discussing 10% tariffs on China starting February 1. However, his comments during the election campaign suggested that the tariffs would be much higher than what he actually announced.
Lower tariffs by Trump would also weigh on market speculation that the Federal Reserve (Fed) will keep interest rates at current levels for a longer period. Market participants anticipate that higher tariffs will increase demand for domestically produced goods and services. This scenario would accelerate inflationary pressures.
Currently, the CME FedWatch tool shows that traders believe the Fed will keep its key lending rate in the range of 4.25%-4.50% in its next three policy meetings.
Source: FXStreet
