HG MARKETS:

Silver (XAG/USD) experienced a slight pullback on Monday, trading around $33.80 after reaching its highest level since October 31, 2024, during Asian trading hours. Despite this dip, the metal’s downside appears limited due to ongoing economic uncertainties stemming from a global trade war, a softer US Dollar (USD), and increasing geopolitical tensions. The escalating trade war between the United States and several of its largest trading partners has raised concerns about its impact on the global economy. This situation has fueled demand for safe-haven assets like silver.

Last week, US President Donald Trump threatened a 200% tariff on alcohol imports from the European Union (EU) and increased levies on Chinese goods entering the US to at least 20%. Such aggressive trade policies have heightened market anxieties, driving investors toward precious metals as a hedge against economic instability. Beyond geopolitical concerns, silver benefits from strong industrial demand and supply deficits. According to global investment firm Wisdom Tree, investors hold a significant portion of silver, and higher prices could encourage sales.

Industrial applications for silver have reached all-time highs, driven by its use in photovoltaic technology, 5G infrastructure, and automotive electronics. The continued expansion of these industries provides strong fundamental support for silver prices. Traders are closely monitoring the upcoming US Retail Sales report for February, which is projected to show a 0.7% month-on-month increase. If the actual figures exceed expectations, the USD could strengthen, potentially weighing on silver prices in the near term.

Additionally, a series of central bank meetings, including the US Federal Reserve’s policy decision later this week, will be key drivers for financial markets. The Fed is widely anticipated to keep interest rates on hold amid economic uncertainties linked to President Trump’s trade policies. A dovish stance from the Fed could provide further support for silver prices.

Geopolitical risks remain a crucial factor in silver’s price action. Over the weekend, the Iran-backed Houthi group claimed responsibility for an attack on the USS Harry S. Truman aircraft carrier and its escorting warships in the northern Red Sea. In response, US Defense Secretary Lloyd Austin reaffirmed that the US would continue targeting Yemen’s Houthi until they cease their attacks on shipping. The Houthis, in turn, have vowed to escalate their retaliation in response to recent US strikes, adding to market uncertainty and strengthening the safe-haven appeal of silver.

Last week, the US and Ukraine proposed a 30-day ceasefire to Russia, with indications that Putin may be willing to support the initiative. Any progress on this front could reduce demand for safe-haven assets, including silver. Silver prices remain influenced by a complex mix of economic, geopolitical, and monetary factors. While concerns over an escalating trade war, rising industrial demand, and Middle East tensions provide strong support, potential diplomatic breakthroughs and central bank decisions could introduce volatility.

Investors will be closely watching upcoming economic data, trade developments, and geopolitical events to gauge silver’s next move. The metal’s role as both an industrial commodity and a safe-haven asset ensures that it remains a key focal point in global financial markets.