Silver (XAG/USD) retreated during Friday’s Asian trading hours, hovering near $32.50 after rallying in the previous session. The metal is facing headwinds amid renewed geopolitical tension, sparked by a report from the Financial Times indicating that the Trump administration is preparing to add several Chinese semiconductor firms to the U.S. export blacklist—commonly known as the “entity list.”
Given silver’s vital role in the electronics and semiconductor sectors, the metal has become increasingly sensitive to disruptions in chip industry dynamics. The reported move to restrict access for Chinese firms to U.S. technology has raised concerns over a slowdown in semiconductor production, potentially weakening industrial demand for silver.
Easing Trade Tensions Undercut Safe-Haven Demand
The pullback also reflects fading safe-haven demand, as signs emerge of easing U.S.-China trade tensions. According to recent reports, both countries have reached a preliminary deal aimed at significantly reducing tariffs. Under the proposed agreement, the U.S. would cut tariffs on Chinese imports from 145% to 30%, while China would slash its tariffs on American goods from 125% to 10%. This marks a meaningful step toward de-escalation in the long-running trade conflict and has tempered investor appetite for protective assets like silver.
Dollar Weakness and Fed Policy Expectations Offer Support
Despite the short-term retreat, silver’s downside remains cushioned by a weakening U.S. dollar, which fell in response to softer-than-expected economic data that bolstered market expectations for Federal Reserve rate cuts. A weaker dollar typically enhances the appeal of dollar-denominated commodities, such as silver, by making them cheaper for foreign investors.
Lower interest rate projections also improve the investment case for non-yielding assets like silver, reducing the opportunity cost of holding the metal.
However, Federal Reserve Chair Jerome Powell added a note of caution, warning that inflation could become increasingly erratic due to frequent supply-side shocks. This unpredictability, he suggested, may complicate the central bank’s ability to manage inflation and maintain stable economic conditions.
As markets weigh these competing forces—geopolitical frictions, easing trade barriers, and shifting Fed policy expectations—silver remains in a delicate position, with near-term volatility likely to persist.
