Silver prices fell 0.5% to near $36.50 during the European trading session on Friday (August 1). The precious metal faced selling pressure as the confirmation of tariff agreements by the United States (US) with several of its major trading partners, such as Japan, the European Union (EU), South Korea, and others, as well as growing investor confidence that Washington will reach a deal with China, has reduced demand for safe-haven assets, such as silver.
Safe-haven assets have performed strongly since US President Donald Trump's announcement of tariff policies, which aim to reduce the country's large fiscal deficit. Demand for these assets increased as investors worried that protectionist policies could lead to a costly global trade war.
Theoretically, rising global economic tensions increase demand for safe-haven assets. Meanwhile, a strong rally in the US Dollar (USD) also weighed on silver prices. The US Dollar Index (DXY), which tracks the greenback against six major currencies, traded firmly near a new two-month high around 100.00.
Technically, a higher US dollar makes silver a more expensive bet for investors.
The US dollar strengthened as traders reduced bets in favor of a Federal Reserve (Fed) interest rate cut at its September meeting due to upbeat second-quarter Gross Domestic Product (GDP), a strong Personal Consumption Expenditures (PCE) inflation report for June, and signals from Chairman Jerome Powell that there is no rush for a rate cut.
Higher interest rates by the Fed bode ill for non-yielding assets, such as silver. On Friday, investors will focus on the US Nonfarm Payrolls (NFP) data for July, which will be released at 12:30 GMT. (alg)
Source: FXstreet
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