Silver’s downward trend is continuing, albeit at a much shallower decline than seen last week, with the price now below $22 an ounce.
After spending January drifting sideways, the shock to markets delivered by surprisingly strong US jobs figures caused silver to drop almost $2 an ounce as investors now expect the Federal Reserve to raise interest rates for longer than previously anticipated. As physical silver doesn’t produce a yield, the precious metal finds itself out of favour during periods of rising interest rates, as seen for much of 2022, with other interest-paying assets favoured instead.
Inflation data out of the US will paint a fuller picture on the true state of the world’s largest economy which so far seems to be holding up well in the face of inflation that remains way above the Fed’s 2% target but does now seem to be on a downward trajectory. Silver will be hoping that this week’s data points also come in better than expected to reduce the pressure on the Fed to maintain its policy of rate hikes for as long as traders have now readjusted for and give the precious metal the positive jolt it needs after a disappointing 2023 so far.
The fundamental outlook for silver remains very strong with the metal in strong demand from the industrial sector and supply unable to keep pace. Yet for now, that fundamental case has not been heard with macroeconomic factors dominating trading sentiment instead.
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