Fed's Dovish Bias, Silver Maintains Its Shine
Silver prices maintained their gains near a 14-year peak in the $42 area as the US dollar weakened and Treasury yields declined in Asian trading on Tuesday, while markets expected a Fed rate cut this week. The probability of a 25 bps rate cut dominated expectations (a 50 bps chance was small), boosting interest in USD-denominated commodities. This dovish bias was the main driver of silver's rally ahead of the FOMC decision.
From a fundamental perspective, industrial demand for silver—particularly for photovoltaics (solar) and electrification—remains strong. The Silver Institute report shows record industrial demand in 2024 and a persistent physical deficit, while mine production only increased slightly. The estimated 10 tons per GW of PV demand underscores silver's role in the renewable energy chain, so a supply cut or a surge in solar installations could tighten the market.
Looking ahead, the Fed's tone will be the primary driver: a dovish cut (and subsequent signals) could potentially weaken the USD further and support silver. Conversely, a more cautious/hawkish tone could trigger short-term profit-taking. Beyond the Fed, monitor Chinese data and DXY/yield movements--both of which are sensitive to dollar-denominated precious metals. Given the positive fundamental deficit, the correction is expected to be temporary as long as industrial demand remains strong.
Source: Newsmaker.id
