The silver market (XAG/USD) is witnessing a modest retreat during Friday’s Asian trading session, with the metal currently hovering near $32.50. This follows a brief rally in the previous session, and the pullback is primarily attributed to geopolitical tensions stemming from a report that the US Administration plans to expand its export blacklist, targeting several Chinese semiconductor firms.
These firms are expected to be added to the US Department of Commerce’s Entity List, curbing their access to advanced American technologies. An expert-level review of this topic is presented by Tandexo brokers in this publication.
Geopolitical Tensions Pressure Silver
Silver, while traditionally classified as a precious metal, is increasingly viewed as an industrial commodity, especially due to its indispensable role in electronics and semiconductor manufacturing. Silver is widely used in conductors, photovoltaic cells, and integrated circuits, making it a critical input in chipmaking.
Consequently, any policy development that affects the semiconductor industry, particularly one involving China, the world’s leading chip consumer and a major player in chip assembly, tends to ripple through silver markets.
The Financial Times report has reignited concerns about a renewed tech cold war between the US and China. Market participants are now reassessing the risks associated with global supply chains, particularly in sectors reliant on advanced materials and electronics. This uncertainty is weighing on industrial demand expectations for silver, thereby putting pressure on its price.
Softening Safe-Haven Demand
Another headwind for silver is the weakening safe-haven demand. Recent developments indicate that global trade tensions—a key driver of safe-haven flows in recent years—may be easing. Reports suggest that Washington and Beijing have reached a tentative agreement to reduce mutual tariffs.
As per the proposal, the US would cut its tariffs on Chinese imports from 145% to 30%, while China would reciprocate by lowering tariffs on US goods from 125% to 10%. This diplomatic progress is being interpreted as a sign that bilateral relations may be stabilizing, reducing the urgency for investors to seek shelter in precious metals like silver and gold.
The decline in safe-haven demand reflects a broader shift in investor sentiment, with a renewed appetite for risk assets such as equities and emerging market currencies. This shift tends to exert downward pressure on metals traditionally sought during times of economic and geopolitical instability.
Support from Weakening US Dollar and Fed Rate Cut Expectations
Despite bearish influences, silver’s downside potential appears limited. A key supporting factor is the recent weakness in the US Dollar (USD), following the release of economic indicators that suggest a slowing US economy. Data pointing to subdued inflation, soft job growth, and slowing consumer spending have prompted a recalibration of expectations for monetary policy.
Market participants now believe that the Federal Reserve may cut interest rates sooner than previously anticipated. Lower interest rates generally weaken the US Dollar, which in turn makes dollar-denominated commodities like silver more attractive to foreign buyers. Additionally, lower borrowing costs reduce the opportunity cost of holding non-yielding assets such as silver, enhancing its investment appeal.
Technical Outlook and Key Levels
From a technical analysis standpoint, silver remains in a consolidation phase, oscillating within a tight range between $31.80 and $33.20 over the past few sessions. The current level around $32.50 is near the 50-period moving average on the 4-hour chart, which acts as a dynamic support zone.
A decisive break below $31.80 could open the door for a deeper correction toward $30.90, where a horizontal support cluster from early May resides. On the flip side, a bullish breakout above $33.20 would likely signal a continuation of the medium-term uptrend, targeting resistance near $34.00, a psychologically significant round number and a previously tested high.
Broader Outlook for Silver
Looking ahead, silver’s performance will likely be dictated by a combination of macroeconomic trends, geopolitical developments, and industrial demand cues. The US Administration’s evolving stance on Chinese tech firms could escalate or de-escalate tensions depending on future enforcement measures or diplomatic engagement.
Meanwhile, the Federal Reserve’s policy trajectory remains a pivotal variable. Should economic data continue to deteriorate, boosting the likelihood of multiple rate cuts this year, silver could regain momentum even amid reduced safe-haven flows. Investors should also monitor Chinese industrial output figures and semiconductor sector performance, which are closely linked to silver’s industrial utility.
Conclusion
Silver prices have come under short-term pressure as geopolitical uncertainty around the US-China tech conflict weighs on industrial sentiment. However, the softening US Dollar, rising expectations for Fed rate cuts, and structural demand from technology sectors are likely to provide a cushion against deeper declines.
For traders and investors, the near-term outlook is one of cautious consolidation, with price action dictated by developments in US-China relations, Fed policy, and dollar dynamics. In this fluid macro environment, silver remains a dual-purpose asset, balancing between its precious metal status and its growing importance as an industrial commodity in the digital age.
