HG MARKETS:

Silver (XAG/USD) remains relatively stable near the $34.00 mark during Monday’s European session as traders exercise caution amid ongoing global economic uncertainties. Investors have largely moved to the sidelines, awaiting clearer signals regarding economic trends, particularly with former U.S. President Donald Trump poised to announce new reciprocal tariffs on Wednesday.

Trump’s proposed tariff strategy, expected to be unveiled on what he calls “Liberation Day,” is centered around imposing reciprocal duties on imports—meaning that the U.S. will levy tariffs equivalent to those imposed by other countries on American exports. If implemented, these measures could significantly disrupt global trade dynamics, potentially sparking retaliation from affected nations and leading to broader economic repercussions.

Historically, rising trade tensions have driven investors toward safe-haven assets like silver, as uncertainty in global markets increases the appeal of precious metals. If these tariffs escalate trade conflicts, silver prices could experience a strong upward push due to increased demand from investors seeking security against economic volatility.

Market analysts anticipate that the imposition of new tariffs could weaken U.S. economic growth, as higher import costs would likely be passed on to American businesses and consumers. This would effectively raise inflationary pressures, making goods and services more expensive and complicating the Federal Reserve’s policy trajectory.

The prospect of heightened inflationary risks has already led Federal Reserve officials to maintain a restrictive monetary stance. On Friday, San Francisco Fed President Mary Daly expressed growing uncertainty regarding the likelihood of two interest rate cuts this year. Her confidence was shaken following the release of the U.S. Core Personal Consumption Expenditure (PCE) Price Index data for February, which revealed a sharper-than-expected increase. The index, a key measure of inflation closely monitored by the Fed, rose to 2.8%, surpassing both the forecast of 2.7% and the previous month’s 2.6%.

Should inflation continue to rise due to the effects of higher tariffs, the Fed may be forced to maintain interest rates at elevated levels for a prolonged period. Historically, a hawkish Fed policy and higher interest rates tend to exert downward pressure on non-yielding assets like silver, as investors shift their focus toward interest-bearing assets such as government bonds.

Despite the potential headwinds posed by the Fed’s policy stance, silver could benefit from a rise in safe-haven demand if trade tensions intensify and economic uncertainty grows. Historically, geopolitical and economic turmoil have driven investors to allocate more funds toward precious metals, considering them as a hedge against market instability.

If Trump’s reciprocal tariffs lead to a broader global trade conflict, market sentiment could shift in favor of silver, potentially driving its price higher. Additionally, if inflation continues to rise, investors may turn to silver as a store of value to preserve purchasing power.