At 13:48 GMT, XAG/USD is trading $31.85, up $0.02 or +0.05%.
Silver’s appeal was boosted by expectations of a Federal Reserve rate cut in December, fueled by last week’s US jobs report. The CME FedWatch tool indicates an 86% probability of a 25 basis point cut, up from 73% last week. Lower interest rates generally favor silver because lower yields lower the opportunity cost of holding non-yielding assets.
However, attention now shifts to the US Consumer Price Index (CPI) and Producer Price Index (PPI), which will be released on Wednesday and Thursday. A warmer-than-expected CPI print could dampen expectations for further rate cuts after December, potentially limiting silver’s upside momentum.
China’s renewed gold purchasing and stimulus measures
China’s central bank resumed gold purchases in November, increasing reserves to 72.96 million fine troy ounces after a six-month hiatus. This signals a renewed commitment to precious metals as Beijing looks to implement looser monetary policy and plans for more proactive fiscal measures in 2024. Industrial demand for silver could also benefit from these stimulus initiatives, supporting prices.
Geopolitical tensions add a safe-haven premium
Increasing geopolitical risks, including heightened tensions in the Middle East, have strengthened silver’s appeal as a safe haven. Reports of Israeli military activities in southern Syria and near Damascus underline the metal’s role as a hedge against uncertainty.
Market forecast
Silver prices are expected to remain bullish in the near term if they remain above the 50-day moving average at $31.72. China’s renewed gold purchases, combined with fiscal stimulus, are likely to support demand for precious metals. Increased geopolitical risks also provide a solid foundation for safe haven flows.