Fed Rate Cut Fuels Silver Surge
In a significant move, the Federal Reserve decided to cut rates by 50 basis points to the 4.75%-5.00% range. This marks a pivotal shift after a series of rate hikes aimed at controlling pandemic-induced inflation. This reduction is the first since March 2020. Policymakers are striving to avert a gradual slowdown in the labor market from descending into a more pronounced downturn.
The Impact on the U.S. Dollar
The Fed's decision to slash interest rates is seen as a reaction to cooling economic conditions, which weakens the dollar. As a result, non-yielding assets like gold and silver become more attractive to investors. These precious metals may offer an appealing alternative to those wary of volatile markets, as they are negatively correlated to the greenback as shown below:
Gold and Silver in the Spotlight
With the Fed's jumbo rate cut, gold has managed to resist downward pressure and continues to see positive inflows. This resilience is notable since the yellow metal is already at historic highs. Silver, though not at its annual peak of $32 per ounce, is gaining traction.
Investors are anticipating another 50-bps rate reduction from the Fed by the end of the year, which would lower bond yields further. This prospect may encourage a shift towards precious metals, such as gold and silver.
Geopolitical Influences
Geopolitical tensions are also playing a crucial role in bolstering the prices of precious metals. Ongoing conflicts in the Middle East and Ukraine are unsettling markets. Additionally, North Korea's missile tests are creating global uncertainty. These factors enhance the appeal of precious metals as safe-haven assets.
Silver ETFs focus
Silver ETFs increased by 3.97% over the week, bringing their year-to-date performance to +32.50%. On the other hand, Gold ETFs gained 1.40% but managed to record CAD 81 million of positive flows. The iShares Silver Bullion ETF (SVR) achieved a weekly performance of 4.50% resulting in a year-to-date performance of +29.77%.
Here's a comparison between Silver ETPs
Group Data
Funds Specific Data: MNS, SVR, SBT.B, SVR.C
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
