Silver (XAG/USD) reversed its recent losses during the Asian session on Thursday, trading around $32.80 per troy ounce. The precious metal gained momentum, buoyed by its safe-haven appeal in the face of growing global uncertainties, particularly following US President Donald Trump’s proposal of a 25% tariff on automobiles, as well as new duties on semiconductors and pharmaceuticals.
Despite its status as a non-interest-bearing asset, silver remained resilient, with minimal downward pressure as investors absorbed the Federal Open Market Committee (FOMC) meeting minutes, released on Wednesday. The minutes reaffirmed the decision to keep interest rates unchanged in January and highlighted the Fed’s cautious stance on future rate adjustments.
Fed officials emphasized the need to assess economic activity, labor market trends, and inflation more thoroughly before considering rate cuts. They stressed that clear evidence of declining inflation is necessary before any easing of monetary policy. Some officials raised concerns that changes in trade and immigration policies could complicate the disinflation process, with inflation expectation measures ticking higher in recent months.
Markets are currently pricing in a potential rate cut for 2025, with some speculating a second reduction. Federal Reserve Vice Chairman Philip Jefferson noted late Wednesday that the central bank has time to evaluate its next steps, pointing to a resilient economy and inflation still above target. Meanwhile, Chicago Fed President Austan Goolsbee highlighted that while inflation has eased, it remains elevated, indicating that further rate cuts could be possible once inflation reaches a more acceptable level.
Silver’s appeal is also being supported by robust industrial demand, driven by the growing focus on electrification and manufacturing. China’s planned addition of 357 gigawatts of solar and wind power in 2024 underscores silver’s crucial role in the renewable energy sector. Additionally, the People’s Bank of China (PBOC) chose to keep its Loan Prime Rates (LPRs) unchanged, signaling a cautious approach to monetary stimulus, with the one-year and five-year rates remaining at 3.10% and 3.60%, respectively.
