At 12:35 GMT, XAG/USD is trading $31.21, down $0.33 or -1.05%.
The Chinese stimulus disappoints traders
The drop in silver prices came after China’s finance minister gave a lackluster update on the country’s budget plans. The market had expected stronger stimulus measures to support the slowing economy of China, the world’s largest silver consumer. However, the Treasury press conference offered few details, leaving traders unimpressed.
Instead of clear, aggressive actions, the announcement focused on general pledges to increase debt and support the real estate sector, but lacked details on how much would be spent. This made global investors, especially those looking for a boost in Chinese commodity demand, uneasy. China’s ongoing struggles with weak domestic consumption and deflationary pressures have further heightened market concerns.
Geopolitical tensions increase market uncertainty
Outside of China, silver prices are also affected by broader geopolitical risks. Investors are closely watching tensions in the Middle East, fearing that Israel will retaliate against Iran. US officials have indicated that Israel is considering attacks on its military and energy infrastructure, adding a layer of uncertainty to the market. Historically, such tensions have supported safe havens like silver.
Additionally, investors are awaiting comment from U.S. Federal Reserve officials this week, as any signs of changes in interest rate policy could impact silver and other commodities. The market estimates an 88% chance that the Fed will cut rates by 25 basis points in November, which could provide support for non-yielding assets like silver.
Outlook: Bearish in the short term
Silver faces near-term headwinds due to weak demand from China and a lack of decisive fiscal measures to stimulate the Chinese economy. Unless the Chinese government comes up with more concrete stimulus plans, silver will likely remain under pressure. A sustained break below $30.22 could spark further selling, with potential to test support at $29.71. However, geopolitical risks may provide some support, keeping prices from falling too sharply. Traders should pay attention to developments from both China and the Middle East to gauge the next move.