Silver Rallies, Chinese Demand Boosts Sentiment
Spot silver prices (XAG/USD) strengthened on Wednesday (May 13), hovering around US$88.96/ounce, up 2.91% at the latest update, despite a bullish trend in the dollar and US yields.
Fundamentally, re-intensifying US inflationary pressures reinforce the narrative of higher interest rates for longer. April's CPI rose 3.8% year-on-year (core 2.8%), while April's PPI surged 6.0% year-on-year (core 5.2%)—a combination that has prompted repricing of policy expectations and curbed interest in non-yielding assets.
The rise in inflation is also supported by the energy channel, with persistently high oil prices containing the risk of cost-based inflation. On Wednesday, Brent was around US$107.62/barrel and WTI around US$103.09/barrel, keeping the market sensitive to energy supply and shipping issues related to the Strait of Hormuz.
Despite the less favorable dollar-yield environment, silver remains resilient thanks to support from physical demand in Asia. TD Securities notes (as per the materials) state that persistently high silver premiums in China and buying activity on the Shanghai Futures Exchange are supporting the market, particularly as import arbitrage opportunities have opened up several times in recent weeks.
Going forward, silver's direction will be largely determined by three variables: how long yields and the dollar remain stable after the CPI/PPI, developments in energy risks from Hormuz, and market signals on interest rates. Several CME FedWatch readings cited by the media also indicate the market is becoming more conservative regarding the possibility of easing, with the likelihood of a rate hike in 2027 considered increasing. (arl)
Source: Newsmaker.id
