
Stock Market Decline Amid Middle East Tensions
October 2, 2024
Silver Prices Slide on Strong U.S. Jobs Data, Heightened Rate Hike Worries
October 5, 2024Silver prices are approaching a 12-year high of $32.72 as of Wednesday, bolstered by robust industrial demand and heightened geopolitical risks in the Middle East. The ongoing tensions in the region have injected uncertainty into the market, with traders vigilant about potential disruptions in oil supply impacting inflation and Federal Reserve policy. Furthermore, a surge in crude oil prices due to concerns of further escalation is adding to inflationary pressures, potentially challenging the Fed’s current monetary easing stance. Daily Silver (XAG/USD) As of 12:52 GMT, XAG/USD is trading at $31.65, showing an increase of $0.22 or +0.69%. Support from Industrial Demand Despite facing challenges, silver continues to benefit from strong demand from the industrial metals sector, supported by recent stimulus efforts in China. The metal’s relative affordability compared to gold positions it favorably for potential gains, with Saxo Bank forecasting a possible rise to $40 in the upcoming year. Silver’s dual role as a safe-haven asset and industrial commodity suggests it could outperform gold in the near future. Silver and Gold Performance amid Dollar Strength While silver is holding steady, gold is experiencing slight setbacks amid a stronger U.S. dollar. Gold rallied earlier in the week due to geopolitical tensions in the Middle East, though a clearer direction on U.S. interest rates is awaited by traders. Analysts believe the overall environment remains favorable for gold, especially if the Federal Reserve hints at further rate cuts. The likelihood of a 50 basis point cut in November is currently at 38%, with market participants closely monitoring upcoming U.S. economic releases, such as the nonfarm payroll report. Any signs of economic weakness could reinforce expectations for a Fed rate cut, boosting both gold and silver prices. Focus on Geopolitical Tensions and Treasury Yields Geopolitical uncertainties and mixed U.S. economic data have led to a rise in Treasury yields. Investors are particularly concerned about global geopolitical tensions, such as the conflict between Iran and Israel, which could affect global markets. Safe-haven assets like silver and gold are expected to benefit from these heightened risks. Positive Market Outlook for Silver In the short term, silver is anticipated to receive support from industrial demand and geopolitical tensions. The metal might experience further gains if the Middle East conflict escalates and disrupts oil supplies, leading to increased inflationary pressures. Moreover, if U.S. economic data indicates a slowdown, expectations of additional Fed rate cuts could offer further momentum. Given these factors, silver is likely to test its 12-year high and potentially target $33 in the near future.