Silver is just about holding above $19 an ounce at the start of a trading week in which the Federal Reserve is likely to implement another 75 basis point hike to its benchmark interest rate.
The US central bank’s switch to implementing a series of large interest rate hikes from April onwards was the catalyst for a multi-month slump in the price of silver that it is still recovering from. So while this week’s expected increase is well-trailed, it serves as another reminder of the difficult macroeconomic environment a non-yield-bearing asset such as silver finds itself in.
As such, silver is finding it hard to make significant gains despite a fundamental supply/demand outlook that points to a metal in high demand as the world transitions away from fossil fuels in favour of renewable sources, notably solar energy and electric vehicles.
This week’s Fed hike will keep the pressure on silver and further delay the metal’s opportunity to recover to a level that better reflects its fair value. Until these interest rate clouds lift, silver seems to have found a strong ceiling at around $21 an ounce.
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