Silver is holding steady at around $22.50 an ounce as markets brace for today’s crucial Federal Reserve interest rate decision.
The US central bank finds itself in an unpleasant balancing act between avoiding sparking further concern about the health of the banking sector while also not adding pressure to an already stressed system as well as ensuring inflation is kept under control. Whereas a 25 basis point increase seemed almost certain a week or so ago, the collapse of three US banks and the near misses with Republic and Credit Suisse have dramatically changed the outlook.
For silver investors, a pause on interest rate hikes would be welcomed as the physical metal’s lack of dividend makes it less attractive at times of rising interest rates. It was the Fed’s signalling and implementation of a series of large hikes last year that saw silver’s price collapse from $26 to $18 an ounce from April to September and the precious metal has yet to recover to the level it was trading about before the Fed adopted its aggressive stance.
Throughout the large rate hikes, the fundamental picture for silver has remained healthy with the metal in hot demand from industry, notably the solar sector, with supply unable to keep pace. Therefore if today does bring relief on the interest rate front then this could be the opportunity silver has been waiting for to showcase its fundamental strength and start rallying back up to $26 an ounce.
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