China's recent economic measures have also worsened the outlook for industrial metals. Last week, the Chinese government announced a 10 trillion yuan debt package aimed at raising local financing and promoting economic stability, but it fell short of market expectations for direct economic stimulus.
The disappointment hit the market for industrial metals, including silver, which plays a key role in solar energy production through its use in solar cells.
Chinese solar panel makers, a key consumer of silver, are scaling back production amid concerns about potential tariffs on imports under the Trump administration. Morgan Stanley estimates that these tariffs on Chinese solar products could reach up to 60%, creating uncertainty in future demand for silver.
Furthermore, China's consumer price index (CPI) in October rose only 0.3% year-on-year, lower than expected, and the monthly CPI fell by 0.3%. The lackluster inflation figures suggest slowing growth and raise concerns about the strength of China's economic recovery and the impact on global metals demand.
Rising US dollar and Treasury yields fuel decline in silver
The strength of the US Dollar Index (DXY), which hovers around 105.70, and rising US Treasury yields, with the 2-year and 10-year yields at 4.28% and 4.32%, respectively, are exacerbating silver's downward trend.
While Fed Chairman Jerome Powell recently made it clear that the Fed's approach remains data-driven, the strength of the dollar and the Fed's cautious stance on rate cuts signals potential challenges ahead for silver prices.
