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Silver rises near $51.00 amid dovish Fed expectations

  • Silver continues its advance, supported by the prospect of further Federal Reserve rate cuts.
  • Weak US data maintains safe-haven appeal despite the resolution of the US government shutdown.
  • The US Dollar steadies slightly, but remains under pressure from dovish Fed expectations.

Silver (XAG/USD) trades around $51.00 on Tuesday at the time of writing, up 0.90% for the day, extending its three-day winning streak. The metal benefits from growing speculation that the Federal Reserve (Fed) will continue its monetary easing cycle in December. Markets currently price in a more than 60% chance of a new rate cut, according to the CME FedWatch tool, reinforcing investor appetite for non-interest-bearing assets such as Silver.

Expectations of further policy easing follow recent weak economic indicators. The University of Michigan Consumer Sentiment Index dropped to 50.3 in November, its lowest level since mid-2022, while job losses in October and subdued retail activity highlight a slowing economy. These developments support the view that the Fed will prioritize growth stabilization over inflation concerns, a dynamic typically favorable to precious metals.

Meanwhile, the partial resolution of the US government shutdown helps to improve risk sentiment, though underlying concerns about its economic impact persist. The US Senate passed a funding bill by a 60-40 vote, signaling a likely reopening of federal agencies within days. However, the long period of administrative paralysis is expected to delay key data releases, complicating the Fed’s assessment of the economy’s momentum.

The US Dollar (USD) shows limited reaction, with the US Dollar Index (DXY) hovering near 99.60 as traders await further guidance from upcoming Federal Open Market Committee (FOMC) speeches. Analysts at OCBC note that the absence of fresh data will keep the market focused on Fed communication. ING analysts warn that markets may be underestimating downside risks for the USD into year-end, as a normalization of data releases could expose further signs of weakness in the labor market and US growth. “A resumption of data releases in the US does carry non-negligible downside risks to the dollar”, note the analysts.

In this context, Silver remains well supported by a mix of safe-haven demand and dovish monetary expectations, even as improving political clarity limits its upside potential.

Silver FAQs

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

NZD/USD: Clear break above 0.5665 is unlikely – UOB Group

There is scope for New Zealand Dollar (NZD) to test 0.5665; a clear break above this level is unlikely. In the longer run, weakness in NZD has stabilized; for the time being, it is likely to trade in a range between 0.5605 and 0.5695, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
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AUD/USD trims gains and nears 0.6500 on hesitant markets

The Australian Dollar is trading moderately lower against the US Dollar on Tuesday, retreating from Monday’s highs at 0.6540, and reaching session lows at 0.6514 during the European morning session.
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