U.S. Economic Indicators and Silver Performance
On the US front, the GDP report showed a slowdown in growth and rising inflation, benefiting silver as a hedge. However, the bearish performance of the US dollar boosted silver’s gains amid expectations of Fed tightening. Investors expect the Fed to maintain higher interest rates due to persistent inflation, supporting US Treasury yields and the USD.
On the data front, US GDP growth for Q1 came in below expectations at 1.7%, down from the previous quarter’s 3.4%, indicating slower economic expansion. The GDP Price Index surged to 3.1%, signaling stubbornly high inflation, likely keeping the Federal Reserve cautious about lowering interest rates and making the USD more attractive to foreign investors. The probability of a rate cut in September stands at 58.2%.
Furthermore, Core Personal Consumption Expenditures rose more than anticipated, up 3.7% QoQ, reflecting increasing inflationary pressures. Positive figures also emerged in Initial Jobless Claims, dropping to 207K, and Pending Home Sales, up 3.4% MoM in March. Traders prefer to wait for more cues about the Federal Reserve’s (Fed) rate cut path before placing strong bets.
Impact of US Economic Factors on Silver Price
On the geopolitical front, easing concerns about a worsening of tensions in the Middle East weakens the safe-haven appeal of silver, likely limiting its potential for gains. This, combined with other factors, contributes to putting a cap on the upside for silver.
Recent military actions between Israel and Iran in the Middle East have made the region tense. Israel struck Iran’s consulate in Damascus, and Iran retaliated, but the attacks haven’t led to a big war yet. Both sides want to show their strength without starting a full-scale conflict, but they’re testing each other’s capabilities.
Therefore, the tense situation in the Middle East, marked by recent Israeli-Iranian military actions, has not significantly impacted the price of silver.