Chinese economic policies have increased concerns in the silver market. “Industrial metals such as silver are sensitive to interest rate policy in China, which drives a significant portion of global production,” noted an analyst at a leading brokerage.
Geopolitical risks offer limited appeal for safe havens
As industrial demand for silver falters, silver’s appeal has gained some support amid rising geopolitical tensions. Ukraine’s use of US-supplied missiles to hit Russian territory marked a significant escalation in the war between Russia and Ukraine.
However, market turmoil subsided after Russian Foreign Minister Sergei Lavrov reassured efforts to prevent nuclear escalation, stabilizing investor sentiment.
Impact of strong dollar and Fed policies
On the US front, the dollar remains strong, but there has been some mild profit-taking following a recent rally fueled by expectations of reduced interest rate cuts from the Federal Reserve. A stronger dollar typically puts pressure on the price of silver, making it less attractive to international buyers.
Jeffrey Schmid, president of the Federal Reserve Bank of Kansas City, noted Tuesday: “The Fed’s confidence in achieving its 2% inflation target will shape interest rate decisions going forward.”
Schmid also highlighted the potential for further tightening if inflationary pressures persist.