Silver declines as traders assess Trump policy implications

Silver resumed its downside move after its recovery met resistance near $32.20 on Friday, as traders assess the impact of Donald Trump’s victory in the US presidential elections on domestic and the world economy.

Trump promised to raise tariffs by 10% universally, expecting that China could face duties rising as much as 60%. Higher tariffs on imports would boost national production and prompt labour demand, which in turn will prompt inflationary pressures. This will force the Federal Reserve to opt for a hawkish interest rate stance.

However, Fed Chair Jerome Powell doesn’t see any immediate impact of Trump’s victory on the monetary policy action in the upcoming meetings, after the bank cut interest rates by 25 basis points (bps) to 4.50-4.75% on Thursday.

Meanwhile, some recovery in the US Dollar after Thursday’s correction has also weighed on the white metal’s price.

The DXY Dollar Index, which gauges the greenback’s value against six major currencies, jumped to nearly 106.40.

Apart from expectations for the Fed turning hawkish, an absence of meaningful economic stimulus by China has also weighed on the price of silver.

In Friday’s Asian session, China announced a massive 10 trln yuan programme to refinance local government debt with approval by the National People’s Congress. Market experts see the stimulus package as a measure against Trump’s potential tariffs, however, they consider it as insufficient to fix the likely impact on their economic growth.

Economists at Standard Chartered expect that, “China’s growth would suffer a hit of as much as two percentage points, should Trump follow through on his campaign vow to raise tariffs on Chinese goods to 60%.”

Silver as a precious metal has applications in various industries such as solar energy, mining and power, and signs of weak China growth prospects impact XAG’s price.