Posted 2nd November 2022

Silver Makes Steady Headway Even as Another Large Fed Hike Expected

silver kinesis bar bullion

Silver is edging up towards $20 an ounce even though today is likely to bring another large interest rate hike by the Federal Reserve. This positive start to what is likely to be a busy trading day illustrates the strength of support that is building up for silver.

Since silver’s multi-month slump finally reached its nadir in September, the price has been consistently trying to recover some of the ground it lost over the previous six months. Yet its efforts to build a significant rally have been stymied by the prospect of more interest rate hikes by central banks across the world, in particular the Fed, as silver’s lack of yield makes it less attractive compared with interest-bearing assets such as bonds when rates are increasing. 

Yet while the Fed is largely expected to hike its benchmark rate by another 75 basis points today, attention is starting to switch to what the US central bank will do in December and beyond. An increasing number of analysts are pricing in a 50 basis point move by the Fed in December before this series of hikes peters out in 2023.

All eyes will be on Fed Chair Jerome Powell in his press conference that follows the interest rate announcement as investors try and determine where he sees future interest rates going as the bank seeks to balance bringing inflation back under control against the risk of tipping the country into a recession.

The fact that silver is still able to make gains, albeit fairly small ones, despite this hawkish macroeconomic environment serves as a reminder of the strong fundamental case for the metal that is desperate to emerge as soon as the pressures from central banks enable it to do so. While today is unlikely to see significant gains for silver, the prospect of the metal getting off to a flying start in 2023 keeps on mounting.

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