During the European session on Monday, Silver prices (XAG/USD) climbed to nearly $28.00 per troy ounce. The escalation of geopolitical tensions in the Middle East has provided support for safe-haven assets like Silver.
On Monday, the Israel Defense Forces (IDF) intercepted around 30 “projectiles” crossing from Lebanon into northern Israel. While some projectiles landed in open areas, no injuries were reported. This incident has added to the already tense situation in the region.
Recent upbeat US economic data has led traders to reduce their expectations for a 50-basis point interest rate cut by the Federal Reserve in September. This shift in expectations may put pressure on non-yielding assets like Silver, as the Fed is less likely to implement significant rate cuts.
Furthermore, Federal Reserve Governor Michelle Bowman has stated that she sees upside risks for inflation and ongoing strength in the labor market. This suggests that the Fed may not be inclined to cut rates at the upcoming September meeting.
Despite the positive economic data, the weak outlook for global manufacturing activity has dampened demand for Silver as an industrial input. Traders are now awaiting US producer inflation data and consumer inflation figures to gauge the stability of price growth.
Analysis:
The surge in Silver prices due to geopolitical tensions highlights the metal’s role as a safe-haven asset in times of uncertainty. The reduced likelihood of a significant rate cut by the Federal Reserve may impact the demand for non-yielding assets like Silver. Investors should closely monitor geopolitical developments and economic data to make informed decisions about their investment portfolios.