Silver prices (XAG/USD) have seen an uptick as China, the largest metals market globally, reveals intentions for new stimulus measures aimed at revitalizing its economy. This comes in response to the waning impacts of previous actions announced earlier in the week. As of Thursday’s trading session in Europe, silver is valued at approximately $32.00 per troy ounce.
In a significant move, China is set to inject over CNY 1 trillion into its largest state-owned banks, which are currently grappling with issues such as narrowing profit margins, falling earnings, and a rise in non-performing loans. This capital infusion represents the first of its kind since the global financial crisis of 2008.
Furthermore, silver is benefiting from heightened tensions in the Middle East. An Israeli airstrike in Beirut resulted in the death of a prominent Hezbollah commander on Tuesday, which has escalated fears of an extended conflict as cross-border rocket fire has intensified.
In a related development, the United States, France, and several allied nations are urging for an immediate 21-day ceasefire along the “Blue Line” border between Israel and Lebanon. They are also advocating for a ceasefire in Gaza following intense negotiations at the United Nations on Wednesday.
The non-yielding nature of silver has gained traction following last week’s significant 50 basis point rate cut by the U.S. Federal Reserve (Fed). Furthermore, growing expectations of further rate reductions in 2024 have increased the commodity’s attractiveness to investors due to the low opportunity costs associated with holding it.
According to the CME FedWatch Tool, market participants are currently estimating a nearly 50% likelihood that the Fed will execute a total of 75 basis points in rate cuts, reducing interest rates to a range of 4.0-4.25% by the end of the year. This anticipated easing has contributed to a weakening U.S. Dollar (USD), making silver more accessible for international buyers and subsequently boosting demand for this dollar-denominated asset.
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