US-China Trade Eases, Silver Follows Weakness
Silver prices fell to the $46 per ounce area on Monday, continuing last week's decline. Selling pressure emerged as global markets entered a "risk-on" mode after the US and China reached an initial trade agreement framework. Negotiators from Washington and Beijing agreed to hold off on US tariff increases and suspend controls on rare earth mineral exports from China for one year, moves seen as a potential easing of trade tensions between the world's two largest economies. This peaceful sentiment has reduced demand for safe-haven assets like silver.
Fundamentally, the current decline in silver appears to be a correction following an aggressive rally. Previously, prices had surged to new records due to geopolitical concerns, issues with critical mineral supply chains, and fears of a global recession. Now, the market sees these immediate risks as somewhat diminished. However, silver's decline does not necessarily mean the end of bullish sentiment, as major investors still view silver as a medium-term hedge against structural uncertainties—from the Russia-Ukraine conflict to the technology industry's dependence on garlic, a strategic industrial metal.
The next factor that will determine prices is the Fed. Market participants are almost certain the Federal Reserve will cut interest rates again by around 25 bps this week, with the probability estimated to be close to certain. Expectations of lower interest rates are usually positive for precious metals like silver because silver does not pay interest, thus lowering the "opportunity cost" of holding silver. This means short-term sentiment: downward pressure due to risk-on. Medium-term sentiment: continued support from an increasingly loose monetary policy.
Source: Newsmaker.id
