Silver has sunk to $20 an ounce after Federal Reserve Chair Jerome Powell surprised markets with his hawkish rhetoric in his testimony to US lawmakers yesterday.
With the prospect of interest rates in the US being raised as high as 6%, silver’s attractiveness has dwindled further with the precious metal’s lack of yield seeing other interest-bearing assets favoured instead.
Yet again, silver has seen its price hit harder than its precious metal peer gold on the same news. While gold is still just about holding above $1,800 an ounce, silver has lost $1 an ounce to be trading at its lowest level in 4 months. The size of the move demonstrates silver’s greater volatility risk compared with gold and continues the narrative from last year in which once the tide turns against silver, traders hit its price very hard.
As such the short-term risk for silver is more losses, even though its fundamental outlook remains positive.
Holders of the metal will be hoping that the price soon stabilises and recovers some of the ground lost but that is unlikely to happen until we get confirmation of how hawkish the Fed truly is when it meets later this month to decide on its latest interest rate move.
If the Fed only increases by the 25 basis points still currently forecast then silver will have some light relief but any move larger than that could see silver fall further yet.
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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