Silver (XAG) Drops to $32.30 as US-China Trade Tensions Ease

Silver prices are taking a hit, sliding over 1% to around $32.30 during Friday's European trading as traders grow increasingly optimistic about improving trade talks between the US and China.

Silver Falls Despite Lower US Bond Yields as Safe-Haven Appeal Fades

XAG took a solid punch downward to near $32.30 during European trading hours on Friday, shedding more than 1% as market sentiment shifted toward riskier assets. The white metal's decline comes as investors are betting on a potential trade deal between the United States and China, taking the shine off traditional safe-haven assets.

The optimism is bubbling up from recent signals out of Washington, with the White House saying it will "conduct a series of negotiations" with Beijing to avoid "escalation in trade tensions." US Treasury Secretary Scott Bessent doubled down on this approach Thursday, stating, "We are going into a series of negotiations with China to prevent escalation again."

This diplomatic pivot marks a real change in US-China relations, which have been looking up since both countries agreed to slash tariffs by 115% for a 90-day cooling-off period. This move has market experts revising their global growth forecasts upward, creating a brighter economic outlook that typically doesn't do silver any favors.

Industrial Demand Could Still Give XAG a Boost Despite Safe-Haven Selling

While silver (XAG) usually takes a hit when market mood improves, the metal's industrial uses might provide some underlying support. As a key industrial material, silver demand could benefit from China's position as the world's manufacturing powerhouse. The temporary trade truce between the US and China will likely let Chinese factories get back to business as usual, potentially driving up industrial demand for the metal.

Silver isn't just pretty jewelry – it's crucial in electric vehicles, electronics, and mining operations. This split personality as both precious metal and industrial workhorse creates a complicated market picture that traders need to navigate carefully in today's economic landscape.

Market watchers point out that even as investors ditch safe havens, increased industrial activity could help pick up some of the slack in the medium term. That said, Friday's price action suggests immediate sentiment is winning out over longer-term industrial demand prospects.

XAG Price Drops Despite US Treasury Yields Taking a Dive After Soft Economic Data

What makes silver's decline particularly head-scratching is that it's happening despite a notable drop in US bond yields. The 10-year US Treasury yield has pulled back sharply to around 4.40% from its monthly high of 4.55% posted on Thursday. This retreat in yields followed weaker-than-expected US Producer Price Index (PPI) and Retail Sales figures for April.

Usually, when yields on bonds fall, non-yielding assets like silver tend to look more attractive. This relationship exists because there's less opportunity cost to holding precious metals when interest rates drop. However, Friday's trading shows this relationship being temporarily trumped by the improving mood around trade developments.

The disconnect between falling yields and declining silver prices shows how geopolitical factors and trade relations can sometimes throw traditional market correlations out the window. Traders are clearly more focused on what improved US-China relations mean than on the typical yield-driven patterns that often guide precious metals markets.

Technical Analysis Shows XAG/USD Stuck in a Descending Triangle Pattern

From a chart perspective, silver (XAG) is currently trapped in a Descending Triangle formation on the four-hour timeframe. This pattern typically signals indecision among traders and often comes before a significant directional move. The near-term trend remains murky as the white metal bounces around the 20-period Exponential Moving Average (EMA), which is hovering near $32.44.

The 14-period Relative Strength Index (RSI) is bouncing around inside the 40.00-60.00 range, further confirming the sideways chop that's taken hold in recent sessions. This technical indicator suggests neither overbought nor oversold conditions, leaving traders hunting for additional signals before making any big directional bets.

Looking ahead, major resistance sits at the March 28 high of $34.60, which will likely act as a key ceiling for any potential upside moves. On the downside, the April 11 low of $30.90 represents a crucial floor that bulls will be eager to defend. A clean break below this level could trigger a wave of selling and potentially kick off a more significant correction in silver prices.

What's Next for Silver (XAG) as Trade Relations Evolve and Economic Data Rolls In?

As we look ahead, several factors could drive silver's (XAG) path in the coming weeks. How US-China trade talks develop will remain front and center, with any signs of trouble likely to give the metal a boost through increased safe-haven buying. On the flip side, more good news on the trade front could keep the current selling pressure going.

Market players will also be keeping a close eye on upcoming economic releases for clues about interest rate expectations and broader market sentiment. With recent US inflation and retail numbers coming in softer than expected, everyone's watching to see if this trend continues, potentially influencing Fed policy decisions that could impact precious metals markets.

The push and pull between silver's dual identity as both safe-haven asset and industrial metal continues to create fascinating market dynamics. Investors need to juggle considerations of global risk appetite against industrial demand outlook, particularly as they relate to manufacturing activity in China and the booming electric vehicle sector worldwide.

For now, silver (XAG) seems to be at a crossroads, with the near-term direction likely hinging on how US-China trade relations unfold and how markets interpret upcoming economic data against the backdrop of central bank policy expectations.