- Silver price moves sideways as traders remain cautious due to the Jackson Hole Annual Symposium scheduled for August 22-24.
- Fed Chair Jerome Powell will address the potential for interest rate cuts Annual Symposium on Friday.
- The Silver could find support due to safe-haven flows amid lacking a truce agreement between Israel and Hamas.
Silver price (XAG/USD) edges lower to near $29.50 per troy ounce during the European hours on Thursday. Traders are focused on Federal Reserve Chair Jerome Powell's upcoming keynote speech at the Jackson Hole Annual Symposium on Friday, where he is expected to address the potential for interest rate cuts in the United States.
The downside for non-yielding Silver could be limited, as the Federal Reserve is expected to implement 100 basis points (bps) in rate cuts by the end of this year. However, there is some disagreement among market analysts on whether the Fed will opt for a 25 or 50 bps cut at its September meeting. Lower interest rates would make commodity assets like Silver more attractive to investors, as they may offer better returns in a low-rate environment.
CME FedWatch Tool suggests that the markets are now pricing in a nearly 65.5% odds of a 25 basis point (bps) Fed rate cut in its September meeting, down from 71.0% a day ago. The probability of a 50 basis point rate cut increased to 34.5% from 29.0% a day earlier.
FOMC Minutes for July’s policy meeting indicated that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming meeting in September as long as inflation continued to cool.
The safe-haven Silver could find support amid the ongoing deadlock in securing a truce agreement between Israel and Hamas, which raises the risk of a broader conflict in the Middle East. On Wednesday, US President Joe Biden urged Israeli Prime Minister Benjamin Netanyahu to prioritize achieving a truce in Gaza and the release of hostages, but both Israel and Hamas remained steadfast in their demands.
Vice President Kamala Harris also joined the conversation following the reports from Palestinian health officials that Israeli airstrikes had killed at least 50 Palestinians within 24 hours, according to a Reuters report.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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