- Spot silver continued to rally on Tuesday, at one point nearing $27.00/ounce before falling back under $26.50.
- As commodity markets broadly continue to rally, silver is likely to retain healthy inflation hedging-related demand.
Spot silver’s (XAG/USD) ascent turned up a gear on Tuesday, with the precious metal rallying a further more than 3.0% on the day, taking its run of gains since the start of the month to over 8.0%. XAG/USD prices came within a whisker of hitting the $27.00 per troy ounce level and, in doing so, hit their highest point since mid-June 2021. The US announced a ban on Russian energy imports and the UK announced a plan to phase out Russian oil imports by the end of the year, further triggering fears of Western sanction-induced global stagflation and supporting precious metals.
Gold came within a whisker of hitting record levels in the $2075 per troy ounce area on Tuesday. Given that spot silver still remains some 12% below its record highs from early 2021, there may be some room for catch-up. The next major area that the bulls will be watching is the Q2 2021 highs in the $28.70 area, some 8.0% above current levels. With no end in sight to the fighting in Ukraine and Western sanctions on Russia likely to continue to tighten in the days and weeks ahead, it remains premature to call the top of the broad commodity market rally.
Silver and other precious metals are thus likely to continue to receive healthy demand as both hedges against in inflation and as safe-haven assets. US Consumer Price Inflation (CPI) metrics on Thursday should serve as a timely reminder as to just how far behind the curve the Fed is when it comes to tackling inflation (interest rates just above zero and headline CPI nearing 8.0% YoY). With MoM inflation rates seen surging in the months ahead to reflect recent commodity price action, real interest rates in major developed are not seen rising any time soon, which should maintain a strong incentive to hold non-yielding assets like silver.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.