XAG/USD has continued its downward trend for the second consecutive day, trading around $30.60 per troy ounce in early European trading on Monday. This decline is largely influenced by mixed economic indicators from China, exerting mild pressure on silver prices. The metal plays a crucial role in various industries, including electronics, solar energy, and automotive manufacturing, with China being a key player in global silver demand.
In the second quarter, China’s Gross Domestic Product (GDP) rose by 4.7% year-over-year, a slowdown from 5.3% in the first quarter and below the anticipated 5.1%. Additionally, Retail Sales saw a 2.0% increase in June, which fell short of the expected 3.3% and was lower than May’s 3.7%. Conversely, Industrial Production recorded a 5.3% growth rate year-over-year, exceeding expectations of 5.0%, though it was a slight decline from May’s 5.6%.
The US Dollar (USD) has gained strength amid heightened risk aversion following the attempted assassination of former President Donald Trump over the weekend. Analysts believe that this incident could potentially enhance Trump’s electoral prospects, leading to ‘Trump-victory trades’ that may boost the USD and steepen the US Treasury yield curve. A stronger dollar typically pressures commodity prices like silver, as it makes dollar-denominated assets more expensive for foreign buyers, thereby reducing demand.
However, non-yielding metals like silver might receive some support from increasing expectations of a possible Federal Reserve (Fed) rate cut in September. This anticipation has grown following softer-than-expected US Consumer Price Index (CPI) data for June. According to the CME Group’s FedWatch Tool, there is now an 88.1% probability of a 25-basis point rate cut at the upcoming September meeting, up from 72.2% just a week prior.
