Silver prices fell after Trump postponed tariffs and demand for safe havens declined
Silver prices fell sharply on Thursday, dropping as much as 7% to below $87 an ounce before rebounding to near $90 an ounce.
This volatility followed a record high of $93.50 an ounce on Wednesday.
Key reasons for the sudden drop
1. Tariff postponement:
US President Donald Trump announced a delay in imposing new tariffs on base metal imports, a move the market had anticipated.
Instead, Trump opted to pursue negotiated agreements with exporting countries to ensure stable raw material supplies and reduce risks to US supply chains.
2. Safe-haven demand dwindled:
Trump's statements about receiving assurances that Iran would cease its killing of protesters helped alleviate concerns about a potential US military escalation. This, in turn, reduced protective demand for precious metals, including silver, which is considered a safe haven during times of geopolitical tension.
3. Trump’s Tone on the Fed Chair:
Trump’s more conciliatory tone toward Federal Reserve Chairman Jerome Powell helped improve market sentiment. Trump confirmed that he did not intend to fire Powell despite the ongoing investigations, easing concerns about the independence of the US central bank.
Rapid Recovery and Supporting Factors
Despite this sharp decline, silver quickly recovered a significant portion of its losses, rebounding to near $90. This resilience can be attributed to several factors:
- The door remains open for future tariffs: The White House has kept the option of imposing restrictions on metal imports open should negotiations fail.
- Silver’s fundamental strength: The structural factors supporting silver remain strong, such as increasing industrial demand and its role as an inflation hedge.
- Investment Appeal: Any sharp decline in the price of silver is viewed as a buying opportunity by many long-term investors.
What are the future prospects for silver prices?
Recent silver price movements demonstrate its high sensitivity to US political and economic news, particularly that related to trade policies and international relations.
While short-term factors have led to rapid buying and selling, the overall upward trend for silver remains intact in the current macroeconomic environment, and we expect the $100 per ounce level to be within reach.
The $80-$83 range is considered a good level to consider for establishing medium- to long-term long positions.
Investors are advised to closely monitor developments in trade negotiations and Federal Reserve data, as these two factors will remain key drivers of market volatility in the coming period.
