US elections bring the inflation debate to the fore
The US presidential race between Democratic candidate Kamala Harris and Republican incumbent Donald Trump has led to caution in financial markets, with silver and gold prices sensitive to inflation expectations linked to each candidate’s potential policies. A Trump victory is expected to fuel inflation concerns given his focus on tax cuts and trade tariffs, which have typically driven gold prices higher as investors hedge against rising prices. Silver, which often follows gold’s lead, could also benefit in this scenario, with analysts looking for gold to approach $35.40 on inflation momentum.
Conversely, a Harris victory could lead to more subdued inflation expectations, in line with her approach to continuing the Biden administration’s economic policies. This could dampen precious metals prices in the near term, as a more stable policy stance is likely to dampen demand for inflation hedges for both gold and silver.
Federal Reserve interest rate cut in pictures
To further support silver’s potential, the Federal Reserve will meet on Thursday and is expected to announce a 0.25% interest rate cut. This dovish stance increases pressure on the US dollar, which fell 0.6% to a two-week low. For silver, a weaker dollar makes dollar-denominated metals more attractive to international buyers, potentially boosting demand if the rate cut materializes. Fed Chairman Jerome Powell’s comments after the meeting will be crucial, as any indication of further rate cuts could strengthen silver’s appeal as an alternative asset.
China’s stimulus measures to boost industrial demand
This week’s meeting of China’s National People’s Congress adds another layer of influence, with analysts expecting a new round of fiscal stimulus to counter domestic economic pressure. Given silver’s extensive use in electronics and manufacturing, any substantial stimulus could boost industrial demand for the metal. If Trump wins the election, the likelihood of higher tariffs between the US and China could prompt China to enact a larger stimulus package to offset trade tensions, potentially increasing demand for silver in domestic infrastructure projects.
Market forecast
Silver prices are showing potential to regain momentum, with traders looking for a test of the October high of $34.87 if inflationary pressures rise under the Trump administration or if China announces an aggressive stimulus package. On the other hand, silver could test support near $31.21 if a Harris win brings more stability, reducing inflation expectations. Traders should prepare for increased volatility this week as both the US election results and Chinese policy direction unfold and influence the immediate price movement of silver.