In Wednesday’s trading session, XAG/USD witnessed a robust rally, currently trading at $24.30, propelled by the Federal Reserve’s dovish shift and the descent to fresh lows in the US 10-year yield. The positive home sales data from November failed to instigate significant movements in the US Dollar.
The US housing sector experienced a modest rebound in Existing Home Sales, as indicated by the November report from the National Association of Realtors (NAR). Estimated housing values saw a notable uptick of 0.8%, a stark improvement from the previous -4.1%.
The primary driving force behind the surge in silver prices is the downward trajectory of US Treasury yields. The 2-year rate dipped to 4.38%, while the 5- and 10-year rates currently stand at 3.9% each. The benchmark rate earlier in the session touched 3.87%, marking its lowest point since July. The decline in yields diminishes the opportunity cost of holding non-yielding metals, consequently favoring the price of silver.
This decline in yields is attributed to the dovish signals from the Federal Reserve (Fed) last week, where officials hinted at the possibility of three rate cuts in 2023. The diminishing expectations for tighter monetary policy may intensify on Friday with the release of November’s Personal Consumption Expenditures (PCE) figures, the Fed’s preferred inflation gauge. Projections suggest a deceleration, with the headline and core figures expected to come in at 3.3% and 2.8% YoY, respectively. Investors are closely monitoring this data for insights into the inflationary landscape and potential implications for the precious metals market.
