Silver’s recent rally looks to have run out of steam for the time being with the price dropping back to a little over $21 an ounce.
The US dollar’s renewed strength, driven by hawkish comments from Federal Reserve officials that indicate the bank is unlikely to pause hiking interest rates any time soon, has hit silver, which is priced in the greenback and has an inverse correlation with the currency as a result.
As well as strengthening the dollar, the prospect of further significant rate hikes is also detrimental for silver’s outlook. It was after all the Fed’s switch to this aggressive policy of large interest rate hikes in April that caused the price of silver to come crashing down over a series of months.
Yet while the recent comments remind investors that we are far from out of the inflation woods yet and that further rate hikes are likely, the long-term case for silver remains strong. Therefore the recent dips could present another buying opportunity for those seeing silver as a metal in hot demand for the energy transition.
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