Higher interest rates typically reduce the appeal of non-yielding assets like silver, putting downward pressure. Market participants remain wary of the inflation risks associated with Trump’s re-election, as potential tariffs could push up inflation, which could prevent the Fed from making aggressive interest rate cuts. This mixed outlook is causing traders to hesitate, with many adopting a “buy the rumor, sell the fact” stance in anticipation of higher inflation while remaining cautious about near-term silver gains.
China has introduced a $1.4 trillion stimulus package aimed at strengthening local governments and stabilizing the economy over the next five years. This comprehensive package allocates 6 trillion yuan ($840 billion) directly to regional governments to address their so-called “hidden” debts, with 2 trillion yuan distributed annually. In addition, China plans to issue 800 billion yuan in special bonds annually until 2026, bringing the total package to about 10 trillion yuan.
While this huge financial commitment reflects Beijing’s determination to support its economy, especially in light of the real estate sector’s slump, the outlook remains clouded by Trump’s tariff threats. If these tariffs materialize, they could undermine Chinese demand for commodities, including silver, limiting the effectiveness of China’s stimulus measures on global markets. While Beijing’s policies have focused on boosting the real estate sector and reducing local government debt, the combined effects of tariffs and debt management restrictions could lead to lower-than-expected demand for silver on the largest commodity market in the world.
Physical demand remains moderate
Physical demand for silver and gold has declined in key markets, with Indian buyers, for example, delaying purchases due to price volatility following the recent festival season. In Japan and Singapore, demand remains subdued, reflecting broader reluctance to commit to higher precious metals price levels. This subdued demand is increasing pressure on silver prices as traders consider the broader implications of uncertain global economic conditions.