Silver prices dropped over 2% to below $32 per ounce on Monday, reversing last week’s gains as appetite for safe-haven assets diminished following a major breakthrough in U.S.-China trade relations.
Silver falls as US and China slash tariffs
Over the weekend, both nations agreed in Switzerland to significantly reduce tariffs, easing geopolitical tensions and fueling a broad-based rally across global equity and commodity markets. Under the preliminary deal, U.S. tariffs on Chinese goods will be cut from 145% to 30%, while China will lower its duties on U.S. imports from 125% to 10%, both for an initial 90-day period. The breakthrough fueled optimism that the two economic superpowers may now have room to negotiate a more permanent trade pact, easing fears of a protracted tariff war that had cast a cloud over global growth prospects.
The improved risk sentiment, further bolstered by a fragile but holding ceasefire between India and Pakistan, weighed heavily on traditional safe-haven assets including silver, gold, and the Japanese yen. Investors rotated into riskier assets such as equities, industrial metals, and emerging market currencies, diminishing the immediate defensive appeal of precious metals. Additionally, the firming U.S. dollar added further headwinds to silver prices, as the greenback gained on reduced expectations for near-term Federal Reserve rate cuts following the trade détente.
Not all negative for silver
Despite the short-term retreat, the trade accord also offered a silver lining for the metal’s longer-term industrial demand outlook. Easing trade tensions between the world’s two largest economies could stimulate manufacturing activity and accelerate investment in infrastructure and green energy sectors, where silver plays a critical role, particularly in photovoltaic cells for solar panels, electronics, and electric vehicles. Analysts noted that while silver’s safe-haven premium may wane in the near term, its dual role as both a precious and industrial metal could see it benefit in the months ahead if global industrial demand picks up.
Market participants will now closely monitor incoming economic data from China and the U.S., as well as any follow-up on the provisional tariff truce, to gauge the durability of the recent rally in risk assets and the implications for silver’s medium-term trajectory. Furthermore, attention will also shift to upcoming CPI and PPI readings in the U.S. later this week, which may further influence expectations for monetary policy and, in turn, the precious metals complex.
