Safe-Haven Strengthens: Silver Rises 6%, Focus Shifts to ADP & ISM
Silver prices (XAG/USD) continued their recovery on Wednesday (February 4th), rallying around 6% to near $90.50 in the European session. Risk-off sentiment resurfaced after US-Iran tensions escalated, fueling interest in safe-haven assets like precious metals.
This rise also came after silver experienced an extreme correction—falling more than 30% from its historical peak of $121.61. In uncertain geopolitical conditions, silver often leads as investors seek hedge assets when risk increases.
However, the market continues to note that silver's rally is still facing dollar-related factors. After US President Donald Trump nominated Kevin Warsh to replace Fed Chair Jerome Powell, expectations for the Fed's policy direction shifted. Some market participants believe Warsh tends to favor a strong dollar, so a stronger dollar could act as a buffer against silver's rise.
From a technical perspective, a strengthening dollar typically makes silver less attractive from a risk-reward perspective because silver is traded in USD. This means that when the dollar strengthens, silver prices tend to face additional pressure.
Furthermore, market participants will be monitoring the release of US data tonight, particularly the ADP Employment Change and the ISM Services PMI for January. These two figures have the potential to shift market expectations regarding the Fed's interest rate action, especially after the high volatility in commodity markets in recent days.
According to CME FedWatch, the market currently still views the chances of a Fed rate cut in March and April as relatively small. If US data comes out stronger than expected, the dollar could strengthen again and restrain silver's rally. Conversely, if the data weakens, silver has the opportunity to maintain its rebound momentum.
Source: Newsmaker.id
