Spot Silver extended gains to a new record high of $91.45/oz. on Wednesday, supported by Federal Reserve rate cut prospects and increased safe-haven demand.
Annual headline consumer inflation in the US has remained stable at 2.7% in December, in line with market consensus.
And, annual core CPI inflation has steadied at 2.6% in December, the lowest core rate since 2021, against expectations of an acceleration to 2.7%.
Softer-than-expected US CPI figures suggested that price pressures were gradually easing, providing room for the Federal Reserve to lower interest rates.
Investors are now expecting two or three rate cuts by the Fed this year, compared to FOMC projection of just one 25 bps cut.
Lower interest rates tend to reduce the opportunity cost of holding Silver, which pays no interest.
Geopolitical developments also played a central role in supporting precious metals. Iran has been experiencing intensifying anti-government protests that have reportedly resulted in almost 2,000 deaths, heightening concerns over broader instability across the Middle East.
The situation has prompted a forceful response from U.S. President Donald Trump, who has warned of potential military action and threatened to impose a 25% tariff on countries conducting business with Iran.
Meanwhile, concerns over the Federal Reserve’s independence also prompted investors to flock to safe-haven assets. Federal prosecutors threatened to indict Fed Chair Jerome Powell over his congressional testimony on a Fed building renovation project.
Powell said this was a “pretext” intended to mount more pressure on the US central bank to cut interest rates.
“Persistent tensions, including political pressure on the Fed and geopolitical flashpoints, have lent further support to precious metals, with some possibility that silver and gold could reach new milestones in the coming months,” MUFG’s Soojin Kim commented.
“Markets are also watching a U.S. section 232 investigation that could lead to tariffs on silver, potentially tightening available inventories.”
Spot Silver was last up 3.60% on the day to trade at $90.08 per troy ounce.
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