Totafx Market Insight | November 6, 2024
Silver (XAG/USD) experienced a sharp drop below the $31.00 mark, plunging nearly 5% after Republican candidate Donald Trump’s surprising victory in the U.S. presidential race. This sudden sell-off reflects investor concerns over a potentially calmer geopolitical landscape as Trump has hinted at efforts to secure a truce in the Russia-Ukraine conflict. A resolution to this multi-year conflict could soften global risk sentiment and, consequently, decrease the demand for safe-haven assets like silver.
Trump’s Foreign Policy Agenda Impacts Silver’s Appeal
Precious metals like silver tend to thrive under geopolitical tension. Escalating global risks typically drive investors to safe-haven assets, spurring a silver rally that saw prices rise from $18.00 to a recent high of $35.00. However, Trump’s hints at diplomatic efforts could shift market dynamics, pushing silver out of favor with investors who anticipate a more stable global outlook. Totafx Capital closely monitors how evolving foreign policies can influence precious metals—an area of strategic importance for our clients and readers.
US Dollar Strength Further Pressures Silver
As silver prices fell, the U.S. Dollar Index (DXY) soared to a four-month high of 105.30, while the 10-year U.S. Treasury yield rose to 4.45%. These moves underscore a strengthened USD and higher yields, both of which present additional challenges for silver. For investors, higher yields on assets like Treasury bonds make holding non-yielding assets, such as silver, less attractive, a situation aggravated by the USD’s upward momentum.
| Currency | USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|---|
| USD | – | 1.96% | 1.26% | 1.82% | 0.78% | 1.25% | 0.93% | 1.45% |
| EUR | -1.96% | – | -0.67% | -0.13% | -1.15% | -0.69% | -1.02% | -0.50% |
| GBP | -1.26% | 0.67% | – | 0.54% | -0.47% | -0.02% | -0.35% | 0.18% |
| JPY | -1.82% | 0.13% | -0.54% | – | -1.01% | -0.56% | -0.90% | -0.36% |
| CAD | -0.78% | 1.15% | 0.47% | 1.01% | – | 0.46% | 0.13% | 0.65% |
| AUD | -1.25% | 0.69% | 0.02% | 0.56% | -0.46% | – | -0.33% | 0.20% |
| NZD | -0.93% | 1.02% | 0.35% | 0.90% | -0.13% | 0.33% | – | 0.53% |
| CHF | -1.45% | 0.50% | -0.18% | 0.36% | -0.65% | -0.20% | -0.53% | – |
Upcoming Fed Rate Decision: Could This Be the Turning Point?
Markets await the Federal Reserve’s upcoming interest rate announcement, with a potential rate cut of 25 basis points on the table. If the Fed reduces rates as expected, taking them to 4.50%-4.75%, it could drive the next significant moves in the USD and silver markets. Investors will be watching closely, especially for any remarks from Fed Chair Jerome Powell on the likely impact of Trump’s economic policies. With promises of corporate tax cuts and higher tariffs, particularly on non-Chinese imports, Trump’s proposed economic shifts may send further ripples through the global economy.
Silver’s Technical Analysis: Is $29.00 the Next Key Support?
From a technical perspective, silver’s descent below $31.00 and the 50-day Exponential Moving Average (EMA) near $31.60 reinforces a bearish trend. A further decline may see silver testing the upward trendline around $29.00, a critical support level originating from the February low of $22.30. The 14-day Relative Strength Index (RSI) currently hovers near 40.00; should it fall further, it could indicate a deeper bearish momentum.
Investor Takeaway
Trump’s victory, coupled with a strengthened USD and heightened Treasury yields, has redefined the playing field for precious metals. As we move into the next economic chapter, Totafx Capital will continue to analyze these emerging trends, offering traders strategic insights to navigate the complex intersections of policy, global conflict, and market sentiment.