Silver prices (XAG/USD) experienced slight declines, hovering around $27.85, after retreating from a recent three-year peak of $28.53 in the early European trading session on Thursday. The waning speculation of a Federal Reserve (Fed) interest rate cut has exerted downward pressure on the grey metal. Investors are awaiting the release of the US March Producer Price Index (PPI) for fresh market direction.
Market sentiment shifted on Wednesday as traders scaled back their expectations of Fed interest rate cuts following hotter-than-expected US inflation data. US President Joe Biden’s acknowledgment of the need for further action to tackle rising prices further tempered expectations. March’s US Consumer Price Index (CPI) report indicated a volatile path for inflation, prompting expectations that the central bank will maintain a stance of higher interest rates for an extended period. Consequently, bets on the timing of the first rate cut shifted from June to September, according to the CME FedWatch Tool.
However, despite the downward pressure on silver prices, there are factors that could mitigate losses. Rising industrial demand and the metal’s appeal as an alternative inflation hedge may provide support. Additionally, ongoing geopolitical tensions in the Middle East are bolstering silver’s status as a safe-haven asset. Israel and Hamas’ rejection of ceasefire talks and Iran’s vow of retaliation for an airstrike on its embassy in Syria have heightened uncertainty, potentially lifting silver prices in the near term.
