- Silver price depreciates as easing US-EU trade tension diminishes the safe-haven demand.
- The safe-haven demand for Silver may revive due to growing concerns over US debt issues.
- The non-yielding Silver may attract buyers due to reduced opportunity cost amid lower long-term US yields.
Silver price (XAG/USD) loses ground after registering gains in the previous two sessions, trading around $33.40 per troy ounce during the Asian hours on Tuesday. The grey metal attracts sellers due to diminished safe-haven demand amid the easing trade tension between the United States (US) and the European Union (EU) improves the traders’ risk appetite.
Following Friday’s threat by Trump to impose a 50% tariff on imports from the European Union, the US President decided to extend the tariff deadline on the European Union (EU) after having a phone call with European Commission President Ursula von der Leyen on Sunday. On Monday, the EU agreed to accelerate negotiations with the United States (US) to avoid a transatlantic trade war.
However, the safe-haven Silver may regain its ground amid growing concerns over US debt issues ahead of Trump’s “One Big Beautiful Bill” going through the Senate floor for Voting. The Bill is expected to raise the deficit by $3.8 billion, according to the Congressional Budget Office (CBO).
The Bill’s provisions, including tax cuts, spending increases, and raising the debt ceiling, could worsen US government finances and increase the risk of bond yields staying higher for longer. Higher bond yields can keep borrowing costs higher for consumers, businesses, and governments.
However, the long-term US yields continue to decline for the third successive session, with 10- and 30-year yields on US Treasury bonds standing at 4.48% and 5.0%, respectively, at the time of writing. The lower yields could drive the investors toward precious metals, including Silver, seeking better returns amid the reduced opportunity cost.
The weaker US Dollar (USD) could also support the Silver demand as dollar-denominated metal becomes cheaper for foreign buyers. Investors would likely await the release of the latest FOMC Minutes on Wednesday, followed by the PCE inflation data on Friday, seeking fresh impetus into the Federal Reserve’s (Fed) interest rate outlook.
