Silver (XAG/USD) prices are recovering from recent losses, trading around $31.00 per troy ounce during the Asian hours on Friday. The safe-haven asset gained traction as tensions in the Russia-Ukraine conflict escalated, driving investors toward precious metals.
Russian President Vladimir Putin warned on Thursday that the conflict in Ukraine is rapidly escalating toward a global confrontation. He cited the use of US and British-supplied weapons by Ukraine in attacks on Russian targets, escalating the stakes. According to Reuters, Putin revealed that Russia had retaliated by deploying a new hypersonic medium-range ballistic missile against a Ukrainian military facility, and further strikes are possible. He also emphasized that civilians would be warned ahead of any future missile strikes.
The geopolitical tensions have added to the demand for safe-haven assets like silver, as traders seek protection from potential global instability.
Meanwhile, commodity traders are also closely monitoring the US Federal Reserve’s monetary policy outlook. The latest data from the US Department of Labor showed that Initial Jobless Claims fell to 213,000 for the week ending November 15, down from a revised 219,000 (previously 217,000) in the prior week and below the forecast of 220,000. This has raised expectations that the pace of Federal Reserve rate cuts may slow.
According to data from the CME FedWatch Tool, futures traders now assign a 57.8% probability to a 25 basis point rate cut in December, a reduction from last week’s 72.2%. As silver is a non-interest-bearing asset, it may face headwinds from higher interest rates due to the higher opportunity cost associated with holding it.
However, Chicago Federal Reserve President Austan Goolsbee commented on Thursday that inflation is on track to reach the Fed’s 2% target, and interest rates are likely to be significantly lower in the year ahead. He also suggested that the pace of rate cuts may slow as the Fed nears its neutral rate level, potentially providing some support for silver in the medium term.
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