Silver edges higher ahead of Fed rate decision

The spot price of silver reached a new high above $61 due to limited supply and strong demand. Expectations of a Federal Reserve rate cut are supporting the continued rise in silver prices.

Silver Price Rising

Spot silver reached a new high in Asian trading today, continuing its rally after confidently breaking above $60 ahead of the Fed's interest rate announcement. The precious metal has more than doubled in price this year, driven by several factors:

- Persistently high inflation
- Supply constraints
- Growing investor demand for electronics, solar panels, and ETFs

Structural Deficit

Over the past decade, supply in the silver market has contracted, while demand continues to grow, leading to a structural deficit. Hopes that the Federal Reserve will cut interest rates are also pushing silver prices to new highs.

Fed Rate Cut Expectations

According to CME FedWatch, markets are pricing in an 87.6% chance of a Fed rate cut on Wednesday. This leaves just over a 12% chance of rates remaining unchanged. A Fed rate cut could support silver prices, especially when combined with existing supply tightness and strong industrial and investment demand.

Comparison with Gold and Stocks

Silver is currently outperforming both gold and stocks, although gold was already popular earlier this year, particularly from August to late October, when investors were reacting to tariff-related economic risks. Gold has risen by approximately 60% year-to-date.

Thus, the current situation in the silver market shows significant potential for further growth, especially in light of the expected changes in the Fed's monetary policy.