After a powerful surge in January, the silver market has encountered significant headwinds. The primary catalyst for this reversal is a shift in expectations surrounding U.S. monetary policy, casting a shadow over the non-yielding precious metal.
A Hawkish Tilt from the Fed
Market sentiment shifted following news that Kevin Warsh is being considered as a potential successor to Federal Reserve Chair Jerome Powell. Warsh is perceived as an advocate for a more restrictive interest rate policy. This development has provided substantial support for the U.S. dollar, which in turn exerts downward pressure on dollar-denominated assets like silver.
The fundamental dynamic is clear: silver offers no yield. When interest rates—or expectations for future rate hikes—increase, the opportunity cost of holding assets that produce no income rises. This recent recalibration of investor expectations has triggered a wave of selling pressure in the silver market.
Profit-Taking After a Record Run
The current pullback follows an exceptionally strong performance. In January, silver prices skyrocketed by nearly 70%, according to the source material, reaching an all-time peak. This parabolic move left the market technically overextended. The subsequent aggressive profit-taking from these record levels has amplified the downward momentum.
Current market data reflects this heightened volatility and correction:
– 7-Day Performance: -23.52% to 79.29 USD
– Distance from 52-Week High: -32.17%
– Volatility (30-Day, Annualized): 98.21%
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Key Events on the Horizon
Several imminent events are poised to influence silver’s trajectory. This week, U.S. economic indicators will be in focus. The ISM Manufacturing Purchasing Managers’ Index, due Monday, is particularly relevant given the industrial sector’s status as a major consumer of silver.
The most critical data point arrives Friday with the release of the U.S. Non-Farm Payrolls report. Robust employment figures could further bolster the dollar and maintain pressure on silver prices. Conversely, weaker-than-expected data might revive speculation about a more accommodative monetary policy stance.
Attention is also turning to India, where the presentation of the Union Budget could bring announcements regarding import duties on precious metals. Any changes here would directly impact physical demand, serving as a potential catalyst for the market.
In essence, the near-term path for silver hinges on whether upcoming U.S. data reinforces the “higher for longer” interest rate narrative or provides the foundation for the next counter-trend rally.
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