In early European trading hours on Wednesday, the price of silver faced downward pressure, hovering near $24.90 per troy ounce for the third consecutive session. The cautious sentiment in the market ahead of the Federal Reserve’s interest rate decision contributed to the challenges encountered by silver.
The Federal Reserve is widely anticipated to maintain its current interest rates during its March policy meeting. However, there is a potential for a hawkish tone from the Fed, which could exert further pressure on metal prices, including silver. Investors are keenly observing the Fed’s decision for any signals that could influence the future trajectory of interest rate cuts in 2024 and, consequently, impact metal prices.
Of particular significance is Fed Chair Jerome Powell’s press conference, which serves as a critical focal point for market participants. A hawkish stance from the Fed, indicating an intention to maintain high rates for an extended period, may diminish demand for gold and its counterparts, reversing recent gains driven by expectations of rate cuts.
While other major central banks are expected to keep their current interest rates unchanged, market attention will be focused on signals regarding the potential initiation of monetary easing. Inflationary pressures in the United States have led to a readjustment of the probability of interest rate cuts in the June and July meetings by the Fed, currently standing at around 59.2% and 76.0%, respectively. The anticipation of higher interest rates has diminished the appeal of non-yielding assets such as silver.
However, silver may find some support from rising geopolitical tensions and an improved industrial outlook in China, the largest metals consumer globally. China’s industrial production, fixed asset investment, and retail sales have surpassed expectations, indicating positive economic momentum. Additionally, the decision of the People’s Bank of China (PBoC) to maintain policy rates unchanged at 3.45% could contribute to the supportive backdrop for silver prices.
