Strong dollar and government bond yields create headwinds
Donald Trump's re-election boosted the dollar as traders predicted fiscal policies such as tax cuts and tariffs could boost inflation. The strength of the dollar, which hit a four-month high, makes dollar-denominated assets such as silver and gold more expensive and generally less attractive to international buyers. Similarly, the US 10-year Treasury yield rose to 4.47%, further increasing pressure on silver as higher yields make non-yielding assets such as silver less attractive.
Fed rate cuts and cautious guidance
The Fed cut interest rates by 25 basis points, bringing the federal funds rate to 4.5% to 4.75%, but Fed Chairman Jerome Powell's cautious commentary suggested that future rate cuts may be limited. This has increased uncertainty over the Fed's next move, with markets currently pricing in the possibility of another rate cut in December and then a halt. A sustained high interest rate environment will weigh on silver, as rising interest rates support the dollar and reduce silver's attractiveness as a safe-haven asset.
China's economic stimulus measures and demand outlook
China's new $1.4 trillion economic stimulus plan, while large, faces challenges from potential trade tensions with the US, which could limit its effectiveness in driving demand for silver. be. The stimulus package is aimed at strengthening local government finances and infrastructure and, once fully implemented, could support industrial demand for silver. However, new U.S. tariffs could complicate this outlook and reduce China's consumption of silver-related products.
Slowdown in actual demand in major markets
Demand for physical silver has slowed across major markets, with Indian buyers pausing purchases following festival-driven buying and subdued demand recently reported in Japan and Singapore. This hesitancy, compounded by market uncertainty, contributed to silver's weekly decline, with traders remaining cautious about short-term demand in the face of price volatility and high uncertainty in the global economy. He maintains a cautious stance.
Next week's market forecast
Silver's outlook remains under pressure heading into next week as a strong dollar, rising U.S. Treasury yields and recent Federal Reserve decisions limit upside potential. After three consecutive weeks of decline, silver could test the lower support between $30.44 and $30.12 if bearish momentum continues.
Next week, the US Consumer Price Index (CPI) and Producer Price Index (PPI), released on November 13th, could further shape the trend for silver. If inflation data beats expectations, the Fed could keep interest rates high for an extended period of time, likely strengthening the dollar and weighing on non-yielding assets like silver and gold. In this scenario, silver prices could come under pressure towards lower support levels.
