The strength of the dollar and government bond yields are creating headwinds
Donald Trump’s re-election provided a boost to the dollar as traders anticipated the potential of fiscal policies such as tax cuts and tariffs that could drive inflation. A stronger dollar, which hit a four-month high, generally reduces the appeal of dollar-denominated assets such as silver and gold by making them more expensive for international buyers. Similarly, the 10-year US Treasury yield rose to 4.47%, putting further pressure on silver as rising rates make non-yielding assets like silver less attractive.
Interest rate cuts and cautious guidance from the Federal Reserve
While the Federal Reserve cut rates by 25 basis points, bringing the federal funds rate to 4.5%-4.75%, Fed Chairman Jerome Powell’s careful commentary suggested that future rate cuts could be limited. This added to uncertainty about the Fed’s next steps, with markets now largely pricing in a further rate cut in December, followed by a likely pause. Persistently high interest rates would weigh on silver, as higher interest rates support the dollar and reduce silver’s appeal as a safe haven.
Chinese stimulus and demand prospects
China’s new $1.4 trillion stimulus plan, while extensive, faces challenges from potential trade tensions with the US, which could limit its effectiveness in boosting silver demand. The stimulus package, aimed at strengthening local government finances and infrastructure, could support industrial demand for silver if fully implemented. However, any new US tariffs could complicate this outlook, potentially reducing Chinese consumption of silver-related commodities.
Physical demand is slowing in key markets
Demand for physical silver declined in key markets, with Indian buyers pausing their purchases following recent festival-driven buying and subdued demand in Japan and Singapore. This hesitation, compounded by market uncertainty, has contributed to silver’s weekly decline, and traders remain cautious about near-term demand in light of price volatility and high global economic uncertainty.
Market forecast for next week
The outlook for silver remains under pressure heading into next week, with a strong dollar, high Treasury yields and the Federal Reserve’s recent decision to maintain a restrictive interest rate policy limiting upside potential. After three consecutive weeks of losses, silver could test lower support between $30.44 and $30.12 if bearish momentum continues.
Next week’s US Consumer Price Index (CPI) and Producer Price Index (PPI) reports on November 13 could further shape silver’s trend. If inflation rates exceed expectations, it could lead the Fed to keep rates high for longer, which would likely strengthen the dollar and weigh on non-yielding assets such as silver and gold. In this scenario, silver prices could come under pressure towards lower support levels.