Silver extends rally on trade war concerns

Silver prices climbed toward $39 per ounce on Monday, marking their highest level in nearly 14 years, as investors sought refuge in safe-haven assets amid mounting global trade tensions and growing unease over monetary policy independence in the United States.

The metal’s rally reflects its dual role as both a monetary hedge and an industrial commodity, gaining momentum from fears of economic disruption as well as speculative flows amid shifting policy expectations.

The latest surge was fueled by US President Donald Trump's announcement of a 30% tariff on imports from the European Union and Mexico, set to take effect on August 1. The measure significantly escalates protectionist risks and comes on the heels of a broader tariff campaign announced last week targeting over 20 countries, including major economies such as Japan, South Korea, Canada, and Brazil. The widening scope of trade restrictions has raised alarms about a potential global slowdown, pushing investors toward defensive positioning.

In response, the European Union is reportedly intensifying diplomatic talks with other affected nations, including Canada and Japan, with reports suggesting that coordinated retaliatory measures or multilateral trade responses are under discussion. While formal action has not yet been taken, the prospect of a prolonged trade war has added to global market jitters and driven renewed demand for tangible assets like silver and gold.

The metal also benefited from heightened investor caution ahead of key US economic data releases, including June CPI and PPI figures, which are expected to provide insight into whether import-related cost pressures are beginning to filter through to consumers and producers. A stronger-than-expected inflation print could complicate the Federal Reserve's rate path, especially as policymakers weigh the risks of inflation persistence against potential trade-induced economic drag.

On the monetary front, markets were further unsettled by remarks from White House economic adviser Kevin Hassett, who stated that President Trump could remove Federal Reserve Chair Jerome Powell "if there's cause." The comment reignited concerns about the independence of the Federal Reserve, a critical pillar of financial market stability. While the legality and likelihood of such a move remain uncertain, the remarks nonetheless injected fresh volatility into interest rate markets.

In reaction to the evolving outlook, traders are now pricing in just over 50 basis points of rate cuts by the end of the year, down from earlier expectations of more aggressive easing. The repricing reflects both the inflationary potential of tariffs and the political sensitivity of the Fed’s decisions in an election-sensitive environment. Lower rates typically reduce the opportunity cost of holding non-yielding assets like silver, supporting its investment appeal.

In addition to macro drivers, silver continues to benefit from robust industrial demand, particularly in sectors like solar energy, electronics, and electric vehicles. With global decarbonization efforts accelerating and renewable technologies gaining traction, silver’s role as a critical input material has attracted attention from long-term investors and strategic stockpilers.

Looking ahead, silver’s trajectory will hinge on the outcome of trade negotiations, central bank commentary, and inflation data in the coming days. Should tensions escalate further or inflation prove stickier than anticipated, silver could continue to outperform, especially relative to more cyclical assets. However, any de-escalation in trade rhetoric or a hawkish shift from the Fed could temper recent gains.