Silver Extends Drop to Lowest in a Year as Dollar Keeps Rising
Silver extended fall to the lowest in more than a year as the dollar advanced. Gold slipped to the lowest in more than a month.
(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.
Federal Reserve Chair Jerome Powell said last week that the U.S. central bank could begin scaling back asset purchases in November and complete the process by mid-2022. The Bank of England has left the prospect of a 2021 rate hike open, while Norway’s central bank began tightening policy last week.
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%.
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