Silver is flirting close to its lowest level in almost two months on the prospect of the Federal Reserve, and other major central banks, being forced to implement further interest rate hikes to fully curb high inflation.
The latest inflation data out of the UK has confirmed those fears with consumer prices continuing to rise way above the Bank of England’s 2% target, increasing the likelihood of a 50 basis point increase to its benchmark rate at its next meeting.
While the inflation picture looks healthier in the US, the battle to continue bringing it down remains far from over with Minneapolis Fed President Neel Kashkari the latest to sound a cautionary note stating that while inflation may be falling, “it’s still too high”.
Given that it was the Fed’s adoption of the aggressive monetary policy in April last year that prompted silver to endure a multi-month slump and have kept prices curtailed ever since, the prospect of further hikes by the US central bank is negative for silver.
Once again this hawkish Fed outlook is outweighing the positive factor brought by silver’s outstanding fundamental case with the metal’s strong industrial demand outpacing supply. As such a long-term investor can see the current languishing price as an opportunity but they may need to endure some more pain in the short-term.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
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