Silver is taking stock of the macroeconomic and geopolitical picture with the price stabilising just shy of $22 an ounce.
While the price continues to trade near levels last seen in June, its failure to continue its recent run of gains points to investors reassessing where silver’s fair value now lies.
Certainly the lows touched in September were way below the fundamental price of a metal in high demand from industries such as solar, 5G and electric vehicles should be and this drove silver’s impressive rally since that nadir. However, now that silver has recovered significant ground, the question is: how far can silver climb in an environment where interest rates are likely to continue rising for a while yet?
It was after all the Federal Reserve’s implementation of an aggressive monetary policy from April onwards that caused silver’s price to plunge from above $26 an ounce to below $18 an ounce over the course of spring and summer. And there is no suggestion that the Fed won’t implement another hike in December, it’s more a question of whether it will be another super-sized 75 basis point hike or a slightly more muted 50 basis point one.
Encouraging inflation figures have given hope to investors that the Fed can be less aggressive from December onwards but that contrasts with the recent words of Fed officials that point to a need to keep the pressure up until inflation is truly tamed. So for now, silver’s strong fundamental case is being marked against a hawkish macroeconomic environment with investors working out which is the most dominant factor currently.
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