The price of silver (XAG/USD) shows stability and a positive trajectory, potentially extending its winning streak for a third consecutive day. As of early European hours on Monday, the XAG/USD pair trades around $29.10 per troy ounce. The precious metal, known as a non-yielding asset, gains traction as investors analyze the Federal Reserve’s (Fed) stance on monetary policy amidst indications of easing US inflation.
US Economic Indicators:
Last Friday, the US Bureau of Economic Analysis reported a decrease in US inflation to its lowest annual rate in over three years. The US Personal Consumption Expenditures (PCE) Price Index rose by 2.6% year-over-year in May, down from 2.7% in April, meeting market expectations. Similarly, Core PCE inflation edged lower to 2.6% year-over-year from April’s 2.8%, aligning with estimates.
Federal Reserve Commentary:
Federal Reserve Bank of San Francisco President Mary Daly highlighted the effectiveness of current monetary policy but emphasized uncertainty about the timing of potential interest rate cuts. Daly remarked that sustained or slowly declining inflation would necessitate prolonged higher interest rates, according to Reuters.
Chinese Manufacturing Trends:
Demand uncertainties in China, the largest consumer of silver, contributed to price pressures following reports of a second consecutive month of manufacturing contraction in June. China’s National Bureau of Statistics reported a Manufacturing PMI of 49.5 in June, consistent with market forecasts and marking the fourth instance of contraction.
Conversely, a private survey indicated robust growth in China’s manufacturing sector, with the Caixin Manufacturing PMI rising to 51.8 in June. This figure surpassed expectations of a decline to 51.2 from May’s 51.7, indicating the fastest growth in the sector in three years.
Key Insights:
Current Price: Approximately $29.10 per troy ounce
Trend: Potential continuation of a winning streak
US Economic Indicators: Decreasing inflation supports silver as a hedge asset
Fed Policy: Uncertainty persists regarding the timing of interest rate adjustments
Chinese Market: Mixed signals from manufacturing data impact demand outlook for silver
The silver market remains influenced by global economic trends and central bank policies, with ongoing scrutiny of inflation dynamics and manufacturing activity in key consumer markets like China.
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