Silver’s short-term slide continues with the precious metal now trading comfortably below $21 an ounce as a stronger US dollar alongside concerns over the impact the recent Covid deaths in China will have on the global economy weighed on sentiment.
Once again, silver is illustrating how vulnerable it is to the words and actions of the Federal Reserve and its officials as the latest decline has been prompted by a reappraisal of how much longer the US central bank will keep on raising interest rates for. A rally earlier in the month was prompted by the prospect of the Fed slowing its hikes as soon as the start of next year, but recent comments from Fed officials suggest that any pivot on policy is some way off yet.
With silver’s fortunes so closely aligned to the dollar – which the metal has a typically inversely correlated relationship with – the recent strengthening of the greenback has stopped silver’s recovery since its September lows in its tracks.
While the long-term fundamental outlook for silver remains positive, the short-term clouds brought by Fed hikes are blocking that sunny picture. As a result, these latest dips could present another buying opportunity for brave investors – particularly if the Fed’s hike in December proves to be no greater than a 50 basis points increase.
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