The Fed tried to calm inflation by raising interest rates from 1% to 1.75%, with a massive 0.75% hike. The hawkish policies of Jerome Powell and other central banks will increase the chances of triggering a recession. But this, according to central banks, is still the “least bad” option versus untamed inflation.
This new scenario is of course having an impact on commodities too. Indeed, growing expectations of slower economic growth are denting optimism for raw materials demand.
This explains the decline in prices seen for a large majority of commodities in the last few days. Indeed, on a weekly basis, copper is posting a decline of 4%, while WTI and Brent – the two main oil benchmarks – are down by almost 3% with agricultural commodities also falling.
Live Silver Price - $/oz
In the precious metals space, after an initial decline, gold and silver performed better than other commodities following the Fed’s increasingly hawkish choices.
Indeed, on a weekly basis gold is down by 1%, while silver is posting a tiny loss. Theoretically, both should be suffering from the strength of the greenback with silver more at risk from the new monetary policies, as about half of its demand comes from the industrial sector, unlike gold, which is mostly used in jewellery and as an investment.
Therefore, the recent rebound in the price of silver is an interesting signal. From a technical perspective, the price has recovered to $21.80. A clear break above the $22 mark and $22.20 would open space for further recoveries. Vice versa, in case of new declines, there are solid supports placed at $21.20, $20.90, and $20.40 an ounce.
Carlo Alberto De Casa is an external Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. Carlo provides regular commentary for UK notable outlets including the BBC, Telegraph, The Independent, Bloomberg, FX Empire and Reuters.
With a credential background in Economic Finance and International Exchange (MA), his critical analysis on gold and silver’s markets performance is frequently quoted by leading publications, week-on-week.
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