Posted 3rd August 2022

Silver Slips Below $20 on Prospect of Further Large Hikes Needed by Federal Reserve

silver bar line graph

Silver has slipped below $20 an ounce as recent comments by senior Federal Reserve officials pointed towards further large interest rate hikes needed to tame inflation, forcing a reassessment of the snap reaction to the Fed’s July interest rate decision that was deemed to suggest a less aggressive path. 

The psychological aspect of trading, which is more important to silver than gold given its popularity among retail investors and smaller overall market size, mean that silver investors will want to see the precious metal’s price quickly climb back above the key threshold of $20 an ounce to ensure the tentative return of interest in silver doesn’t immediately evaporate. 

Silver hasn’t benefited from the increased demand for safe-haven assets following an escalation in political tensions between the US and China in the wake of House Speaker Nancy Pelosi’s visit to Taiwan. This is an illustration of the tough time silver has had in 2022 where it has felt the full weight of any negative macro driver, such as rising interest rates, but hasn’t received the equivalent boost from potentially positive drivers such as rising inflation or safe haven demand. 

That said, silver’s moves in late July pointed to a market that had finally found its bottom after a brutal few months so today’s dip can be interpreted as a backward step on an otherwise upward trajectory given the strong fundamental outlook for the metal.

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