The ICE US Dollar Index reached its highest level since July, buoyed by the potential for pro-business fiscal policies under Trump. Such policies, including tariffs and trading strategies, could continue to support the dollar, reducing silver’s appeal as a non-yielding asset.
Government bond yields are hitting new highs, testing non-interest-bearing assets
Rising government bond yields, with the 10-year yield reaching 4.47%, put further downward pressure on silver and other non-yielding assets. Yields have risen amid speculation that Trump’s policies could stimulate economic growth, stoke inflation and trigger further rate hikes by the Federal Reserve. Higher yields increase the opportunity cost of holding assets like silver as investors seek higher returns elsewhere.
The Federal Reserve is expected to announce its latest policy decision on Thursday. While markets generally expect a 25 basis point cut, any indications of a slower pace or a pause in rate cuts could support the dollar’s strength, putting additional pressure on silver and gold prices.
China’s fiscal stimulus in focus as threat of US tariffs looms
The US election results also shape China’s economic strategy, with analysts expecting Beijing to expand its fiscal stimulus in response to possible tariff hikes under Trump. The National People’s Congress is meeting this week to consider a stimulus package estimated at between 6 and 10 trillion yuan (about $844 billion to $1.4 trillion) in state and local bonds. Analysts at Goldman Sachs noted that if Trump imposes new tariffs, China could step up stimulus efforts to soften the economic impact, potentially increasing the package by 10-20%.
For silver, which is heavily dependent on Chinese industrial demand, the size and speed of this fiscal intervention could play a crucial role in market sentiment. However, some economists warn that Beijing’s response will be gradual and serve as a buffer rather than a transformative boost for the metal.
Market Outlook
In the near term, silver remains under bearish pressure, with a potential decline towards $30.67 and, if broken, further decline from the 200-day moving average at $28.49. A stronger dollar, combined with higher interest rates and cautious Fed policy, increases the likelihood of continued headwinds.