Silver Price Forecast: XAG/USD pulls back from five-month high near $34.50

• Silver price remains below the five-month high of $34.49, reached on Friday.
• Safe-haven demand for Silver remains strong as investors seek protection amid rising risk aversion ahead of US tariffs next week.
• As US Treasury yields decline, Silver, a non-yielding asset, may find support and regain momentum.

Silver price (XAG/USD) retreated after gaining over 2% in the previous session, trading near $34.30 per troy ounce during Asian hours on Friday. Despite the retreat, safe-haven demand for Silver remains strong amid heightened risk aversion, driven by escalating trade tensions ahead of new US tariffs next week.

US President Donald Trump recently imposed a 25% tariff on foreign-made cars and auto parts, triggering retaliation threats from the European Union and Canada. This has fueled concerns of a broader trade dispute and potential global economic fallout.

Silver, a non-yielding asset, could regain its footing as US Treasury yields decline. At the time of writing, the 2-year and 10-year yields stand at 3.99% and 4.34%, respectively. However, Moody's has warned that increased tariffs and tax cuts could significantly widen government deficits, potentially leading to a US debt rating downgrade and higher Treasury yields.

Meanwhile, US Gross Domestic Product (GDP) grew at an annualized rate of 2.4% in Q4 2024, exceeding the 2.3% forecast, according to data released on Thursday. Investors now turn their attention to Friday's US Personal Consumption Expenditures (PCE) Price Index for further insight into the Federal Reserve's (Fed) monetary policy stance. The Fed held rates steady last week but reaffirmed expectations for two rate cuts by year-end.

Boston Fed President Susan Collins noted on Thursday that the central bank faces a tough choice between maintaining a restrictive policy stance or acting preemptively to address potential economic deterioration. Meanwhile, Richmond Fed President Thomas Barkin cautioned that uncertainty surrounding the Trump administration's trade policies could push the Fed toward a more cautious, wait-and-see approach than markets anticipate.