Silver rebounds, but Fed rate-hike threat hangs over the metal
Silver (XAG/USD) rebounds on Monday and trades around $66.70 at the time of writing, up 0.40% on the day. The main obstacle to a stronger recovery in Silver remains the shift in expectations surrounding the Federal Reserve’s (Fed) monetary policy.
Silver prices rebounded on Monday, trading near $66.70, up 0.40% for the day. However, the Federal Reserve's potential rate hikes continue to cast a shadow over the metal's recovery. Fed Chair Kevin Warsh signaled a more hawkish stance at the Jackson Hole Symposium, indicating policymakers still have "work to do" to curb inflation.
This shift in expectations has led investors to anticipate a higher likelihood of a 25-basis-point interest rate increase at the September meeting, now at approximately 61%, compared to roughly 35% prior to Warsh's comments. Higher interest rates could negatively impact Silver, as it offers no yield. However, a modest decline in the US Dollar provides some support for the metal.
Geopolitical tensions in the Middle East, with recent strikes between the US and Iran, have boosted demand for safe-haven assets like Silver. Investors are now closely monitoring upcoming US economic data, including the ISM surveys and the August Nonfarm Payrolls report. Persistent signs of weakness in the labor market could help delay expectations for higher interest rates, thereby supporting Silver.
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