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Silver prices (XAG/USD) have retraced some of their recent gains, trading around $30.80 per troy ounce during the Asian session on Monday. This decline is likely attributed to a technical pullback, similar to the weakness observed in gold. Despite the setback, silver, a key safe-haven asset, could regain its momentum as geopolitical tensions continue to escalate, particularly due to the ongoing Russia-Ukraine conflict.
On Friday, Russian President Vladimir Putin confirmed that Russia had conducted a hypersonic intermediate-range missile test targeting the Ukrainian city of Dnipro. The Kremlin stated that the missile strike was a retaliatory measure in response to Ukraine’s first assault on Russian territory, which reportedly involved US and British-supplied weapons.
The escalating conflict may provide renewed support for silver, as investors often turn to the precious metal during times of geopolitical uncertainty. Additionally, silver prices could receive a boost from a weakening US Dollar, following the announcement by US President-elect Donald Trump of his nomination of Scott Bessent, a seasoned hedge fund manager, as the new US Treasury Secretary.
Bessent, known for his fiscal conservatism, is expected to take a more cautious stance on tariffs and trade policies, which has alleviated concerns about aggressive trade measures. This shift in US policy outlook may further undermine the US Dollar, benefiting silver as an alternative asset.
Despite these potential positive factors, silver, a non-interest-bearing asset, may face downward pressure due to the rising opportunity cost associated with higher interest rates. This was reflected in the recent release of strong preliminary S&P Global US Purchasing Managers’ Index (PMI) data, which has heightened expectations that the Federal Reserve may slow the pace of its interest rate cuts. Futures traders are now assigning a 50.9% probability to a 25 basis point rate cut by the Fed, a decline from the 61.9% probability a week earlier, according to the CME FedWatch Tool.
As the Fed’s policy outlook evolves, investors will continue to monitor the balance between geopolitical risks and monetary policy expectations, which will likely play a key role in determining silver’s next move.
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