Silver: Is There Light at the end of the Tunnel?

After the release of September US inflation data – still above forecast – the silver price fell in just a few minutes from $19.20 to $18.50 per ounce.

This happened in conjunction with a quick sell-off in stock markets. But after days of decline, this time the story was different, with a strong market reaction. Indeed, the precious metal rebounded to $19, before slightly slowing down after European indices reduced gains earlier this morning.

Investors are now pretty sure that the Federal Reserve will hike rates by 75 bps (0.75%) in the next meeting, bringing them to 4%. Depending on the next macroeconomic data (particularly inflation and labour markets) in the final meeting of the year, interest rates will grow to 4.50% or 4.75%. 

Of course, the recent hawkish scenario has not been favourable for the precious metal sector. Both gold and silver are in red on the YTD performance, respectively by 8% and 20%. But a growing number of analysts are forecasting that the worst could be over, and the scenario could start to improve in the next few months, once there is clarity about when the Fed could stop raising rates. 

One of the latest positive reports on silver came from Citi, highlighting the chances of recovery in 2023, and calling it an excellent buying opportunity. Moreover, we should also remember that currently, silver is relatively cheap compared to gold. Indeed, the strong decline of the last few months (from $25 to $19 per ounce), brought the gold-silver ratio to the region of 87, well above historical averages.

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis