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Additionally, expectations of two potential interest rate cuts by the Federal Reserve this year are enhancing gold’s appeal, as lower rates decrease the opportunity cost of holding non-yielding assets.
However, the recent suspension of tariffs on Mexico and Canada, following a border security agreement, has improved investor sentiment toward riskier assets. This shift has lifted U.S. Treasury yields and buoyed equity markets, which could cap further gold price gains in the short term.
Silver Faces Headwinds from Risk-On Sentiment and Stronger Dollar
Silver (XAG/USD) traded at $31.43 after dipping to an intra-day low of $31.36. Unlike gold, silver is grappling with downward pressure, primarily due to improved risk sentiment following the U.S.’s tariff pause with Mexico and Canada.
This development has strengthened the U.S. Dollar and U.S. Treasury yields, both of which weigh on silver prices.
Despite these pressures, silver’s decline remains moderate, reflecting its dual role as both an industrial and precious metal. Market participants are closely watching upcoming U.S. economic data, which could shift the current dynamics if signs of economic weakness re-emerge.
Recent U.S. economic data has shown resilience despite trade tensions. The ISM Manufacturing PMI rose to 50.9 in January from 49.3 in December, surpassing expectations and indicating expansion in the manufacturing sector.
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