Silver is continuing its race to the upside, being driven by new fears of trade wars and newly announced tariffs by US President Trump on imported aluminum and steel.
Silver rose above $32, but the momentum quickly faded in the aftermath of the US labor market data, where NFP came in less than expected, but wage growth and unemployment rate showed solid numbers.
Silver may have an opportunity to continue its rebound ahead of upcoming US data such as CPI and PPI, with Fed Chair Powell set to testify before Congress.
Source: TradingView
Trump’s Tariffs & Industrial Demand
Escalating trade tensions, particularly those involving the US, Mexico, and China, may support silver’s uptrend. President Trump’s tariffs on steel and aluminum imports have taken effect, leading to retaliatory tariffs from China and warnings of countermeasures from the European Union. ⁽¹⁾
Concerns about President Trump’s tariff plans have led to short covering by tactical investors, causing a spike in futures and spot silver prices. Tariffs on imported metals have created uncertainties in the market. Anticipation of a 25% tariff on commodities has led to increased buying activity. ⁽²⁾
Silver’s long-term support comes from its industrial applications, particularly in solar energy, electronics, and medical technology.
Mixed Labor Data Complicates the Fed’s Decision
Friday’s NFP data showed that the US economy added 143,000 jobs, less than the 170,000 forecast. However, wage growth (MoM) surged by 0.5% with the unemployment rate ticking lower at 4%. The jobs market data added concerns that tight labor conditions could keep inflation elevated. ⁽³⁾
While job growth slowed, the strong wage data reinforces the view that inflation is lagging. This complicates the Fed’s decision-making, as slower employment growth would typically justify rate cuts, but higher wages suggest inflation risks remain. ⁽⁴⁾
Fed Testimony
Traders and investors are speculating a 70% probability of a Fed rate cut in June, with a small chance of a cut in March. Fed Chair Powell’s testimony before Congress on Tuesday and Wednesday will start at 19:00 (GMT+4) and will be monitored closely by traders and investors.⁽⁵⁾
If Powell expresses concern on slowing growth or tighter credit conditions, markets could raise their expectations of an earlier rate cut, which would likely support silver.
However, if Powell maintains a cautious tone, silver could face continued pressure from firm Treasury yields and a strong US Dollar.
Inflation Data and Other Key Drivers
Fresh economic data will be released this week. First, we have the Consumer Price Index (CPI) report coming out on Wednesday at 17:30 (GMT+4) with Core CPI (MoM) forecasted at 0.3%, CPI (MoM) forecasted at 0.3%, and CPI (YoY) forecasted at 2.9%. We also have the Producer Price Index (PPI) data set for release on Thursday at 17:30 (GMT+4) with a forecast of 3.3% (YoY). ⁽⁶⁾
If inflation data points to cooling, silver may look to extend its recent uptrend as market expectations around future rate cuts evolve. Conversely, persistent inflation or a cautious tone from Fed Chair Powell on interest rates may introduce downside pressures, influenced by movements in US Treasury yields and US Dollar strength.
Should economic data and policy signals remain mixed, silver may consolidate as markets assess the next key catalyst.
