Silver prices (XAG/USD) fell below $32.50 an ounce for the third consecutive session as demand worries heightened due to softer Chinese economic data. China’s lower Producer Price Index (PPI) and Consumer Price Index (CPI) reflect ongoing deflationary forces in the manufacturing sector, a major driver of silver usage. In spite of bearishness, downside risk in the safe-haven metal remains contained with increased global trade tensions, including a 100% tariff levied by China on Canadian agriculture imports in retaliation against previous tariffs. Moreover, mounting fears surrounding the stability of U.S. economy and business volatility may support the safe-haven demand of silver in the near future.
KEY LOOKOUTS
• China’s persistent deflation in the industrial sector could continue to reduce silver demand and pressure prices in the face of declining global manufacturing.
• Increasing trade tensions, such as China’s 100% tariff on Canadian imports, could drive safe-haven demand and support silver prices.
• Deteriorating U.S. economic conditions and business sentiment could improve the appeal of silver as a hedge against market volatility.
• The Federal Reserve’s any dovish comments on economic deceleration could push up precious metal demand, and silver’s present bearish trend may be reversed.
Silver prices continue to stay weak with deflation fears in China and increasing global trade tensions putting immense pressure on sentiment. With the recent reading of China’s Producer and Consumer Price Index numbers showing further evidence of weakness in industrial demand, fears of lowered consumption are pulling silver down. But geopolitical events, including China’s retaliatory 100% tariff on Canadian farm imports and rising trade tensions driven by policies under Trump, may reawaken safe-haven demand. And growing uncertainty regarding the U.S. economic outlook, signaled by dovish comments from the Federal Reserve, may offer support for silver prices in the short term.
Silver prices fall below $32.50 following weaker Chinese economic data, increasing fears about industrial demand. However, rising trade tensions and economic uncertainty in the U.S. could support the metal’s safe-haven allure.
• Silver prices fall below $32.50 on worries about weakening China industrial demand.
• China’s Producer Price Index declined 2.2% YoY, indicating continued industrial deflation.
• China’s Consumer Price Index also fell by 0.7%, driven by wider economic weakness and lackluster consumption.
• Trade tensions rise as China hits Canadian farm products with a 100% tariff in retaliation.
• Geopolitical progress sees global markets stay on their guard with safe-haven metals such as silver in higher demand.
• Uncertainty for U.S. businesses increases, with Fed officials cautioning against possible consequences on economic demand and growth.
• Technical indicators indicate long-term bearish momentum, with silver resisting around $33.00 and finding support at $32.00.
Silver prices are under pressure as anxiety mounts over the deterioration of China’s economic conditions, a world-leading consumer of industrial metals. Recent figures that indicate declines in China’s Producer and Consumer Price Index are manifestations of intensifying deflationary trends, a sign of shrinking industrial activity and decelerating demand. This has sent fears in global markets, particularly over commodities such as silver that have strong correlations with manufacturing and production industries.
XAG/USD Daily Price
Chart Chart Source: TradingView
Meanwhile, increasing international trade tensions are contributing to market uncertainty. China’s announcement that it would levy a 100% tariff on Canadian agricultural products has further ratcheted up the current trade war. These types of geopolitical events tend to drive demand for safe-haven assets such as silver, even in periods when economic indicators are poor. In addition, increased uncertainty about the U.S. economic outlook and business sentiment can further contribute to silver’s status as a hedge against wider market volatility.
TECHNICAL ANALYSIS
Silver is now displaying indications of ongoing bearish momentum following the breakdown below major support around the $32.50 level. The metal has been trending lower for the third straight session, indicating persistent selling pressure. Unless the price recovers upward strength, it can test the next support level around $32.00, whereas any bounce may meet resistance near the $32.80–$33.00 area. Momentum gauges like RSI and MACD also point to a weakening trend, which means that the bears are firmly in command unless a strong reversal signal appears.
FORECAST
Silver prices may rebound even with recent pressure if safe-haven demand improves as global uncertainties increase. Increasing trade tensions, particularly China’s retaliatory tariffs and general geopolitical uncertainty, might propel investors into precious metals. Also, any indications of the U.S. economy slowing down might encourage the Federal Reserve to go more dovish, thereby weakening the dollar and boosting silver prices. Breaking above the $32.80–$33.00 resistance area might unlock more upside traction in the short term.
Silver, however, could continue to come under downward pressure if poor economic data from China continue and industrial demand continues to be weak. Further deflationary tendencies in China’s manufacturing industry may weigh significantly on silver consumption and cap price recovery. Should bear momentum persist and prices break below the $32.00 support level, the next major downside target is seen around $31.50. In addition, a stronger dollar or hawkish Fed signals would also dampen silver’s rise.
