Silver Recovers Slightly, Investors Wary of US Yields

Silver (XAG) prices rose more than 2% to $75.20 on Wednesday (May 20) morning in Europe, attempting to rebound from a near two-week low of $73.10 set the day before.

However, the medium-term outlook remains bearish as US bond yields remain high. The 10-year US bond yield hit 4.69%, while the 30-year yield surged to 5.2%, its highest level since the subprime crisis. This increase has depressed demand for non-yielding assets like silver.

The market now rates the chance of the Federal Reserve (Fed) raising interest rates this year at 56.3%, according to the CME FedWatch Tool, a sharp reversal from initial expectations before the Middle East war that predicted two rate cuts. Rising US inflationary pressures due to high oil prices have contributed to this shift in expectations. The latest CPI data showed headline inflation rising 3.8% year-on-year, a nearly three-year high.

The rise in US bond yields has also strengthened the US dollar

The rise in US bond yields has also strengthened the US dollar. The Dollar Index (DXY), which measures the greenback's strength against a basket of six major currencies, hit a six-week high of 99.47. A stronger dollar makes silver relatively more expensive for dunia investors.

Investors now await the minutes of the April FOMC meeting, scheduled for release at 18:00 GMT, for clues on the direction of the next interest rate policy. Silver's future movement will likely still be driven by interest rate sentiment and inflation developments in the US. (Arl)

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