Silver prices (XAG/USD) retreated on Friday, trading around $34.30 per ounce after gaining more than 2% in the previous session. Despite the pullback, safe-haven demand for the precious metal remains robust as risk aversion rises, fueled by intensifying trade tensions ahead of new US tariffs next week.
President Donald Trump’s recent decision to impose a 25% tariff on foreign-made cars and auto parts has sparked retaliation threats from the European Union and Canada, stoking fears of a broader trade conflict and its potential global economic repercussions.
Silver, as a non-yielding asset, could regain momentum as US Treasury yields continue to decline. At the time of writing, the 2-year and 10-year Treasury yields stand at 3.99% and 4.34%, respectively. However, Moody’s has issued a warning that escalating tariffs and tax cuts could significantly widen the US government’s deficits, potentially leading to a downgrade of the country’s debt rating and higher Treasury yields.
In other economic news, US Gross Domestic Product (GDP) grew at an annualized rate of 2.4% in Q4 2024, slightly surpassing the forecast of 2.3%. Investors are now looking to Friday’s release of the US Personal Consumption Expenditures (PCE) Price Index for further insights into the Federal Reserve’s future monetary policy. The Fed recently kept rates steady but indicated expectations for two rate cuts by the end of the year.
Boston Fed President Susan Collins emphasized that the central bank faces a difficult decision between maintaining a restrictive policy stance or acting preemptively to counter potential economic decline. Meanwhile, Richmond Fed President Thomas Barkin warned that uncertainty surrounding Trump’s trade policies could prompt the Fed to adopt a more cautious, wait-and-see approach than the markets currently expect.
