It is interesting to note the contrasting fortunes of silver versus its precious metal peer gold.
Concerns about the health of the US banking sector have seen gold benefit from haven-seeking investors, yet silver, which is also considered a safe haven, hasn’t experienced anything like the positive price reaction of gold and is instead struggling to hold above $20 an ounce.
A similar pattern was on display last year when once silver fell out of favour when the Federal Reserve started to implement its series of interest rate hikes, any macroeconomic release or comment by a Fed official was interpreted negatively for silver and prompted a fresh dip in its price with silver enduring a multi-month slump from April through to September.
This year after enduring a tough February, hopes of a consolidation in March look set to be dashed as investor support for silver looks weak currently. Rising interest rates are an understandable negative for this non-yield-bearing asset yet the fundamental outlook for the metal is more than strong enough to offset that yet for the moment investors aren’t buying into the strength of industrial demand from sectors such as solar and electric vehicles for silver.
For now, if silver can hold above $20 in the short-term then the next Fed decision on interest rates later this month could present an opportunity for the metal to recover some of its losses, assuming the Fed keeps to a 25-basis point hike rather than surprises with an unexpectedly aggressive move.
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