Silver Price Rises After Dovish Fed Remarks

The silver price rose over 1 percent on Thursday (May 3) after the Federal Open Market Committee (FOMC) eased investors’ concerns by announcing that interest rate increases will be gradual.

The Fed claims that inflation on a 12-month basis is “expected to run near the committee’s symmetric 2 percent objective.”

“Yesterday’s FOMC meeting didn’t spark much fireworks, but it eased concerns over whether the Fed was going to stick to its gradual tightening policy, which I believe they are,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“The key change is they added the word, ‘symmetric’, which was taken as a sign that they would allow inflation to overshoot,” he added.

These positive remarks about inflation and interest rates are good for precious metals silver and gold, as they are sensitive to rising US interest rates. When rates rise these metals tend to become less attractive to investors compared to interest-bearing assets.

“The market will have to get used to the fact that in order to prevent an economic overheating interest rates in the US will continue to rise,” said Commerzbank (OTCMKTS:CRZBY) analysts.

Also supporting white metal prices are geopolitical uncertainties, including ongoing US-China trade talks and the possibility that the US may withdraw from the Iranian nuclear accord.

“Safe-haven buying has been absent of late … but there have been some signals for the past few days that the [US-China] negotiations won’t be as smooth as expected. That would definitely be a focus, particularly now we have got past the FOMC meeting,” said ANZ analyst Daniel Hynes.

Looking forward, investors and market watchers will now turn their attention to US jobs data due on Friday (May 4). Depending on the results of the report, precious metals may lose Thursday’s gains as they did following the last jobs report in March.

As of 9:02 a.m. EST, silver was trading at US$16.49 per ounce.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.  

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