Precious metal investors are seemingly waiting for Federal Reserve chairman Jerome Powell testimony to Congress later this week before expressing their sentiment towards silver.
Silver has been hovering at around $21 per ounce this month, dropping and rising around this price point since the start of the month. as markets prepare for a busy week.
Powell, who heads the world’s most influential central bank, is speaking to the the Senate Banking Committee on Tuesday, and the House Financial Services panel on Wednesday.
This is ahead of the February jobs report in the US, scheduled for Friday.
These events will likely reflect how much more the Fed raises interest rates – a topic of growing uncertainty in the metals community.
If the Fed raises rates, this is likely to further weigh down silver but if its fiscal regime starts loosening, this will improve sentiment towards the commodity.
Wall Street expectations are that interest rates will climb over five per cent this year from their current position of 4.5-4.75 per cent.
Silver entered the new year with expectations that the recovery in the final quarter of 2022 would continue into the new year.
Yet, rather than continue climbing, prices tread water in January before slumping in February.
Investors had been hoping interest rate rises would slow and taper off, in line with cooling inflation and a slowing economy.
However, in the past few weeks the economy has strengthened, with job growth shooting up in January – while inflation has stayed robust at 6.4 per cent.
Rupert Rowling, market analyst at Kinesis Money argued the early signs are that March may be a month of consolidation – with lots of key data and decisions taking place.
He believed this will set the scene for what will follow in the coming months and quarters.
“Silver has found itself struggling since traders and investors repriced how soon the Fed will pause its current policy of hiking interest rates so Powell’s comments on both Tuesday and Wednesday are likely to have a significant impact on determining silver’s direction.
“Once markets move beyond the current focus on how much higher the Fed and other central banks will keep hiking rates for, silver will have the chance to climb higher with its current price way below where its fundamental outlook in which healthy demand is outpacing supply suggests it should be,” he said.