China’s recent economic measures have also dampened the outlook for industrial metals. Last week, the Chinese government announced a 10 trillion yuan debt package to boost local financing and economic stability, but this fell short of market expectations for direct stimulus.
This disappointment has hurt the industrial metals market, including silver, which plays an important role in solar energy production due to its use in photovoltaic cells.
Chinese solar panel makers, crucial consumers of silver, are scaling back production amid concerns about possible tariffs under the Trump administration. Morgan Stanley estimates that these tariffs could be as high as 60% on Chinese solar products, creating uncertainty in future silver demand.
Moreover, China’s consumer price index (CPI) rose by only 0.3% year-on-year in October, which was not as forecast, while the monthly CPI fell by 0.3%. These subdued inflation figures indicate slowing growth, raising concerns about the strength of China’s recovery and its impact on global metals demand.
Rising interest rates on US dollars and government bonds are contributing to the decline in silver
The strength of the US Dollar Index (DXY), which is hovering around 105.70, and rising US Treasury yields, up 4.28% and 4.32% for the 2-year and 10-year bonds respectively, have the downward trend in silver worsened.
While Federal Reserve Chairman Jerome Powell recently assured that the Fed’s approach remains data-driven, the strength of the dollar and the Fed’s cautious stance on rate cuts point to potential challenges for silver prices.