During Wednesday’s European trading hours, the price of silver (XAG/USD) saw a decline, hovering around $30.90 per troy ounce. This retracement follows recent gains and reflects challenges stemming from China’s economic slowdown, particularly impactful given its status as the world’s largest manufacturing center. Silver holds significant importance in various industrial applications including electronics, solar panels, and automotive components, underscoring China’s substantial industrial demand for the precious metal.
China’s Gross Domestic Product (GDP) expanded by 4.7% year-over-year in the second quarter, marking a deceleration from the 5.3% growth observed in the previous quarter and falling short of the expected 5.1%. This growth rate represents the slowest pace recorded since the first quarter of 2023.
The ongoing third plenum of the Chinese Communist Party’s 20th National Congress, convened from July 15 to 18, has so far signaled continuity in China’s economic strategy under President Xi Jinping’s leadership. President Xi emphasized the imperative for the Communist Party to maintain steadfast adherence to its strategic agenda.
In response to the economic slowdown, Standard Chartered forecasts potential measures by the People’s Bank of China (PBoC), including reductions in both interest rates and the reserve requirement ratio (RRR). This adjustment is seen as necessary to support the economy amidst uneven growth drivers and escalating trade tensions, highlighted by recent tariffs imposed by the US and EU on Chinese electric vehicles.
Further contributing to silver’s downward pressure are recent remarks by Federal Reserve Board of Governors member Dr. Adriana Kugler, signaling a potentially hawkish stance. Dr. Kugler suggested that should forthcoming data fail to indicate progress towards the Fed’s 2% inflation target, maintaining current interest rates might be advisable in the interim.
The combination of these factors underscores the current challenges facing silver prices, influenced by both domestic economic conditions in China and evolving monetary policy perspectives from major central banks like the Federal Reserve.
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