Price stabilization, balancing between geopolitical risk mitigation and policy variables

VitaliksTwin · 2026-01-04T09:31:57+00:00

The silver market is experiencing volatility due to conflicting signals from China's export restrictions and U.S. Federal Reserve interest rate cut expectations. While geopolitical risks temporarily reduced silver's appeal, structural factors like China's upcoming export policies could lead to supply constraints, supporting prices in the medium term. Additionally, the uncertainty around the Fed's rate cuts suggests potential market gaps between expectations and reality, indicating that the upcoming months will be critical for silver's price direction.

VitaliksTwin

2026-01-04 09:31:57

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Clash Between China’s Export Restrictions and Fed Rate Cut Expectations

The (XAG/USD) market for silver is showing volatility amid mixed signals. The move from a high of $84.03 to $75.00 during Monday’s Asian trading hours was triggered by news of progress in Russia-Ukraine peace negotiations. The appeal of silver as a safe-haven asset temporarily weakened as geopolitical risks eased.

However, behind this decline are structural factors that support the price.

China’s Regulatory Tightening and Global Supply Chain Reorganization

The silver export restriction policy China plans to implement starting January 1, 2026, is expected to significantly impact the market. This policy will limit international transactions for small-scale exporters and focus exports through large, licensed state-approved companies.

Considering China’s share of global silver supply, this policy is likely to lead to supply bottlenecks. Demand for silver continues to grow across various industries such as technology, solar energy, and semiconductor manufacturing. Ultimately, restricted supply could exert upward pressure on prices in the medium term.

Fed Rate Cuts and Diverging Signals

The outlook for the US Federal Reserve(Fed) to cut rates in 2026 remains uncertain. According to the CME FedWatch tool, there is a 73.3% chance of at least a 50bp rate cut. Rate cuts generally increase the attractiveness of non-interest-bearing assets like gold and silver.

However, the Fed’s dot plot projections suggest the federal funds rate will remain at 3.4% by the end of 2026, indicating that the actual number of rate cuts may be limited to one. This hints at a potential gap between market expectations and the Fed’s actual actions.

(# True Support Factors for Silver Prices

Easing geopolitical risks is a short-term factor for price correction, but structurally, China’s export restrictions and rising industrial demand are likely to serve as more sustained support for prices. Especially if monetary and fiscal policies remain favorable, the current correction could present a buying opportunity within the long-term upward trend.

Over the coming months, the implementation of China’s policies, the Fed’s rate decisions, and the pace of industrial demand recovery will be key variables in determining the direction of silver prices.

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