After rallying to a 12-year high in October 2024, silver price movements in recent weeks have been bearish. Over the past three months, the precious metal has been hitting lower lows and lower highs; a pattern that signals a bearish trend.
As at the time of writing, silver was hovering around the crucial zone of $30. With the risk-off mood fueled by the DeepSeek selloff, the precious metal may find support in its status as a safe haven. However, seeing that the US dollar is also a conventional hedge against economic uncertainties, a stonger US dollar will likely curb the commodity’s price gains.
Additionally, investors are keen on Trump’s policies following fresh threats to impose tariffs on China. Indeed, these threats appear to be overshadowing January’s Fed meeting.
Trump’s tariff threats on China weigh on silver price
During his presidential campaigns, President Trump threatened to impose tariffs of upto 60% on Chinese goods entering the US. A day after his inauguration on 20th January, he indicated that his team was talking on hitting China with a 10% tariff as soon as 1st February.
In his opinion, the levy will serve the Asian country right for failing to deter the shipping of the deadly fentanyl to Mexico and Canada. On its part, China maintains that there are “no winners in a trade war”, adding that strong ties between the two countries are mutually beneficial.
On the basis of single countries, the United States is China’s leading trading partner. On the other hand, the ten ASEAN (Association of Southeast Asian Nations) member countries and the European Union are the country’s key zones for its exports.
Additionally, on Monday, President Trump stated that he plans on imposing tariffs on imported steel, computer chips, and pharmaceuticals. He sees these efforts as an apt way to persuade manufacturers to produce these products within the United States.
While the US’ tariff threats have weighed on silver price in recent sessions, the impact is rather mild. Market participants appear keen on China’s response, which has not been aggressive so far. The second largest economy may result to increasing financial stimulus to boost domestic consumption and bolster investor confidence. Besides, retaliatory tariffs from China would have a major impact on US companies.
In the near term, investors will be eyeing China’s trade figures especially after the Lunar New Year holiday. The country’s factory figures released at the start of the week were rather underwhelming. The data pointed to the contraction of factory activity in January as the government’s recent stimulus measures only offered temporary support to domestic businesses.
US dollar finds footing amid heightened market volatility
In addition to Trump’s policy talks, the DeepSeek sell-off impacted the US dollar and dollar-priced assets by extension. On Monday, tech shares in the US stock market plunged as the market reacted to the release of DeepSeek; a free Chinese AI chatbox that claims to use less data at a fraction of the cost.
The market is on recovery mode with Nvidia shares up by 6% on Tuesday after dropping by 17% in the previous session. Similarly, the greenback was on recovery as the dollar index gathers enough momentum to break the resistance at $108.
As a conventional hedge against inflation and economic uncertainties, the US dollar is set to strengthen further in the near term. With a stronger greenback, silver will get more expensive for buyers holding foreign currencies.
Silver price forecast
The daily chart shows that the price of silver peaked at $34.85 in November last year and then dropped to the current $30.8. It has moved below the support at $32.47, the highest swing in March 2024.
Silver has formed a head and shoulders chart pattern, a popular bearish chart pattern. It is now forming the right shoulder, while the Relative Strength Index (RSI) and the MACD indicators have tilted downwards. Therefore, there is a risk that silver price will have a bearish breakdown, with the next point to watch being at $26.50, its lowest level in August.
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