Silver Extends Drop to Lowest in a Year as Dollar Keeps Rising
(Bloomberg) -- Silver extended declines to the lowest in more than a year as the dollar advanced. Gold slipped to the lowest in more than a month.
A gauge of the dollar touched a nearly 11-month high, reducing the appeal of precious metals for foreign currency investors. Traders have flocked to the greenback this week as they parsed implications of the U.S. debt-ceiling battle and a shift toward more hawkish policy from the Federal Reserve.
“We continue to expect silver to underperform gold on a risk-adjusted basis, as a normalization in industrial demand further weighs on the white metal, while flow effects from tapering QE should also weigh on silver,” TD Securities analysts led by Bart Melek said in a note.
Spot silver fell as much as 4.6% to $21.42 an ounce, the lowest intraday level since July 2020. The white metal is headed for its biggest monthly loss in a year, while gold is on course for its biggest monthly decline since June. Both precious metals are under pressure this year as more central banks start signaling a pullback in stimulus measures used to cushion the economic impact of the pandemic.
The current high level of inflation in the U.S. should dissipate when supply-chain issues are resolved, Powell said during a Senate Banking Committee hearing, adding that the economy was still far from full employment. The comments reassured investors that rate hikes were still a long way off. Philadelphia Fed President Patrick Harker said he sees taper starting soon and rate hikes in late 2022, according to his prepared remarks at a virtual event hosted by the Risk Management Association, Philadelphia Chapter.
“Set against rising real rates and a strengthening U.S. dollar, we don’t see inflation as strong enough to outweigh policy developments,” analysts at Morgan Stanley wrote in a note. “We see lower prices ahead,” averaging $1,621 an ounce next year, they added.
Spot silver fell 4.3% to $21.48 an ounce at 2:09 p.m. in New York. Silver for Dec. delivery fell 4.4% to settle at $21.485 on the Comex. Gold fell 0.6% after earlier rising as much as 0.7%. Platinum and palladium fell. The Bloomberg Dollar Spot Index strengthened 0.7%.
©2021 Bloomberg L.P.