Although it rallied after the US midterm elections, silver was unable to maintain its increase as the dollar climbed after the Fed’s latest policy meeting.
Silver lost the rally it made in the previous session when it dipped on Thursday (November 8) as the US dollar recovered after the Fed released a policy statement keeping interest rates unchanged.
The precious metals had climbed following the US midterm election results, which split Congress between the Democrats and the Republicans and had investors seeking out silver and gold as safe havens. However, the greenback made a comeback Thursday morning ahead of the US Federal Reserve’s policy statement and investors moved away from the metals.
“A rebound in the US dollar index today, following selling pressure this week, is working against the precious metals market bulls,” said Jim Wyckoff, senior analyst at Kitco News.
While there is no expectation for the Fed to raise interest rates this time around, traders will search for clues in the wording of the FOMC statement and Chairman Jay Powell’s remarks at his press conference, on the future direction and timing of the US monetary policy.
Higher interest rates raise the opportunity costs of holding gold, which earns nothing and costs money to store and insure.
Meanwhile, the US dollar has held a steady rally in 2018 with the Republican party’s push through significant tax cuts, as well as strong economic growth, which has prompted the Fed to steadily raise interest rates.
“Today’s Fed announcement may do little to jolt the dollar or wider FX markets, with the central bank widely expected to hold borrowing rates at a range of 2.00-2.25 percent,” stated Joe Manimbo, senior market analysts at Western Union Business Solutions.
“Still, the Fed is likely to leave the door wide open to a December rate hike with the US economy keeping in top gear,” he added.
While the US dollar does not negatively affect silver as much as it does gold, the white metal still feels the pressure of a rising dollar as investors lose interest in the precious metals when the greenback is up.
As of 12:53 p.m. EST silver was down 1.10 percent, trading at US$14.41 per ounce.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.