The price of silver has been on the rise due to dovish comments made by Federal Reserve officials, increasing the likelihood of an aggressive rate cut by the Fed in September. This has caused the non-yielding asset to trade around $28.90 per troy ounce, with potential support from lower interest rates making commodity assets more attractive to investors for better returns.
Chicago Fed President Austan Goolsbee’s remarks further support the notion of easing interest-rate policy soon and steadily over the next year. The CME FedWatch Tool indicates that markets are expecting at least a 25 basis point rate cut at the upcoming September meeting, with the likelihood of a 50 bps rate cut rising to 41.0%.
However, the potential gains for silver may be limited as safe-haven flows could be decreased due to the recent easing of geopolitical tensions in the Middle East. Israeli forces have withdrawn from Jenin after 10 days of intense conflict, leaving behind significant damage to infrastructure. This development may impact the demand for silver as a safe haven asset in the near term.
Investors often turn to silver as a precious metal to diversify their investment portfolio or as a potential hedge during high-inflation periods. It has intrinsic value and can be bought physically in coins or bars, or traded through vehicles such as Exchange Traded Funds. Silver prices can move due to various factors such as geopolitical instability, recession fears, lower interest rates, and movements in the US Dollar, as silver is priced in dollars (XAG/USD).
Silver is also widely used in industry, particularly in electronics and solar energy, due to its high electric conductivity. Demand from these sectors can impact prices, as well as dynamics in the US, Chinese, and Indian economies where usage of silver in various processes or consumer demand for jewelry plays a significant role. Silver prices tend to follow gold’s movements as a safe-haven asset, and the Gold/Silver ratio can help determine the relative valuation between both metals.
Overall, the silver market is influenced by various factors such as geopolitical tensions, interest rate policies, economic dynamics, and industrial demand, which can impact its price movements. Investors should stay informed about these factors to make informed decisions regarding their silver investments.
