Silver is sinking towards $21 an ounce at its lowest level since late November as the prospect of a return to 50 basis point interest rate hikes by the Federal Reserve diminish the appeal of this non-yield bearing asset.
As silver enjoyed a great final quarter of 2022 and recovered lots of the ground it had lost during the earlier part of the year, the precious metal look set for a great 2023 with a strong fundamental case in which demand outstripped supply and the Fed and other central banks would soon end their series of interest rate hikes. Now, while the fundamental case for silver remains as strong as ever, the likelihood of both more and higher than expected interest moves by the Fed has caused silver to plunge, with the price sinking by more than $1.50 an ounce so far in February.
The current downward trend looks worryingly similar to the move silver endured in 2022 when every macroeconomic piece of data or utterance by a Fed official seemed to cause a fresh decline in the metal’s price. Silver holders will be hoping that this time around the market remembers how much in demand the metal remains among industries including solar and EVs and this soon halts the decline.
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