Silver Price Drops as US Bond Yields Recover, PCE Data Awaited
The silver market has witnessed a slight decline in price as the white metal failed to hold the crucial $32.00 level. The precious metal is currently trading around $31.70, down nearly 0.3% in European trading hours on Thursday, 12th May 2022.
Background
Silver, like gold, is often considered a safe-haven asset and its price can be influenced by various factors, including investor sentiment, economic indicators, and geopolitical events. Over the past few days, the silver price had been on an uptrend, reaching a high of $32.65 on 9th May, supported by a weakening US dollar and falling US bond yields.
US Bond Yields and Silver Price
However, the recent recovery in US bond yields has put pressure on the silver price. The yield on the 10-year US Treasury note has risen from a low of 2.73% on 10th May to around 2.85% on 12th May. A rise in bond yields makes non-yielding assets like gold and silver less attractive to investors, as they can earn a higher return from bonds. This has led to a sell-off in the precious metals market.
Upcoming Economic Data
Furthermore, investors are awaiting the release of the US Personal Consumption Expenditure Price Index (PCE) data for January on Friday, 14th May. The PCE is the Federal Reserve’s preferred measure of inflation, and a strong reading could lead to further selling in the precious metals market as it may increase expectations of further interest rate hikes from the Fed.
Impact on Individuals
- Individuals who have invested in silver as a hedge against inflation or as a safe-haven asset may see a decrease in the value of their holdings.
- Silver is also used in various industrial applications, such as solar panels and electronics, so a drop in silver prices could lead to lower costs for manufacturers and potentially lower prices for consumers of these products.
Impact on the World
- A drop in silver prices could negatively impact countries that are significant producers of silver, such as Mexico and Peru, as they may see a decrease in revenues from silver exports.
- Lower silver prices could also impact mining companies that produce silver as a by-product, as they may not be able to recover their costs if the silver price falls too low.
- On the other hand, lower silver prices could lead to increased demand for industrial applications, as the cost of using silver in manufacturing becomes more attractive.
Conclusion
The silver price has dropped to around $31.70 as US bond yields recover and investors await the release of the US Personal Consumption Expenditure Price Index (PCE) data for January. The decline in silver prices could have negative implications for investors holding silver as a hedge or safe-haven asset, as well as for countries that are significant producers of silver. However, lower silver prices could also lead to increased demand for industrial applications and lower costs for consumers of silver-containing products.
It is important for individuals to keep an eye on economic indicators and geopolitical events that can impact the price of precious metals, and adjust their investment strategies accordingly. Additionally, understanding the potential impacts of silver price movements on various industries and countries can help individuals make informed decisions and stay ahead of the curve.
