Silver Gains as China Concerns Persist Amid Dollar Retreat


Silver prices experienced a 0.42% increase during Monday’s morning session, opening at 70530. Lingering concerns over China’s economic condition remained a focal point. The retreat of the dollar and bond yields from recent highs contributed to the attraction of bullion as an investment.

Notably, the 10-year U.S. Treasury yield, having previously hit its peak since November 2007, retreated below 4.3%.

Despite this, new jobless claims data underscored a tight labor market, and regional manufacturing activity displayed its first positive reading in almost a year. These factors intensified apprehensions regarding extended periods of higher interest rates.

Silver’s Rally Amid Lingering China Worries

Persisting apprehensions about debt defaults in China’s property market and shadow banking industry continued to create a risk-off sentiment in financial markets. China’s property giant, Evergrande’s bankruptcy protection filing in a U.S. court, raised concerns of potential ripple effects.

Meanwhile, industrial production in the U.S. surged by 1% in July 2023, exceeding market expectations of a 0.3% rise. Notably, manufacturing output also outperformed predictions. With a 0.5% increase attributed to a notable 5.2% surge in motor vehicle and parts production.

The People’s Bank of China executed a smaller-than-anticipated cut in its one-year loan prime rate on Monday while keeping the five-year rates unchanged due to the country’s sluggish economic activity.

Specifically, the one-year loan prime rate was reduced from 3.55% to 3.45%. Whereas the five-year rate for determining mortgage rates remained steady at 4.20%.

This move was somewhat anticipated after the previous week’s reduction in medium and short-term lending rates.

The rate-setting role of the LPR, influenced by the central bank and designated commercial banks, impacts borrowing conditions in the nation.

Despite being met with disappointment. The PBOC’s rate cut on Monday highlights the challenge of balancing economic support and the yuan’s weakening.

China’s currency recently hit its lowest level in over nine months, prompting the central bank to pledge increased liquidity to counter business slowdown and deflationary concerns.

While welcomed, interest rate cuts have prompted investors to call for targeted fiscal measures. Especially in light of China’s real estate sector challenges.

Analysts, however, remain skeptical about substantial fiscal assistance from the Chinese government, with Fitch Ratings suggesting it could impact China’s sovereign rating.

Fitch anticipates Beijing exercising fiscal restraint. Amid pledges for additional measures to boost domestic spending, the exact implementation details remain limited.


Silver price increase

  1. China economic concerns
  2. Dollar retreat impact
  3. Bullion market analysis