Saad Ullah
Silver price (XAG/USD) falls below $31.00 as the US Dollar rallies on expectations of a hawkish Fed, following Donald Trump's election win and recent economic developments.
XAG/USD Slips Below Key $31.00 Level
Silver prices (XAG/USD) dropped sharply in Monday’s North American session, slipping below the significant $31.00 support level. This decline comes as the US Dollar (USD) strengthens, boosted by market optimism surrounding Republican Donald Trump’s victory in the United States (US) presidential elections and the potential impact of his proposed economic policies.
In his campaign, Trump pledged to impose a 10% increase in import tariffs and lower corporate taxes, policies that analysts predict could inflate the fiscal deficit and trigger inflationary pressures. A higher inflation outlook could push the Federal Reserve (Fed) to adopt a more hawkish stance on interest rates, further supporting the US Dollar (USD) and Treasury yields. With rising yields, non-yielding assets like silver become less attractive to investors, leading to downward pressure on XAG/USD.
Dollar Strengthens with DXY Index and Treasury Yields Up
As of the latest data, the US Dollar Index (DXY)—which measures the dollar’s performance against six major currencies—has surged above 105.60, while 10-year US Treasury yields have risen to 4.37%. This week, market participants are focused on upcoming speeches from various Fed officials, hoping for further insights into the Fed’s rate outlook. According to the CME FedWatch tool, there is a 25-basis-point rate cut expectation, with rates potentially lowering to a range of 4.25%-4.50% at the Fed’s December meeting.
Silver’s decline was further compounded by the absence of a significant stimulus package from China. The metal, widely used across industries like power, Electric Vehicles (EVs), and mining, saw weakened demand as Chinese economic measures fell short of expectations. On Friday, China’s National People's Congress (NPC) introduced a 10 trillion yuan debt package to support economic stability, but analysts note that the package was not as large as some had anticipated.
"It may be disappointing for those who were expecting the NPC meeting to approve a massive fiscal package, but the expectation is unrealistic because the policy goal is to achieve the GDP growth target and reduce tail risks, not to reflate the economy in any meaningful way," said analysts at Macquarie.
Technical Analysis: XAG/USD Approaches Key Support at $29.00
Silver prices are approaching a critical support trendline of around $29.00, which has been in place since the February 28 low of $22.30. After failing to hold the $31.60 mark, the metal’s price remains under pressure, now well below its 50-day Exponential Moving Average (EMA), which currently trades around $31.60.
With the 14-day Relative Strength Index (RSI) nearing 40.00, a further drop could signal increased bearish momentum. A continued decline below the 40.00 level on the RSI would likely indicate further downside for XAG/USD in the near term.
Saad Ullah
