Silver prices are lower through Thursday’s Asia-Pacific trading session, trimming gains made overnight. A pullback in risk aversion across Asian equity markets sapped the metal’s haven appeal, although reports of a possible skirmish in eastern Ukraine are seeing sentiment sour. South Korea’s KOSPI index remains up around 1% through mid-day trading although US equity futures are lower.
Prices may continue to fall this week if the current calculus holds and tensions in Ukraine don’t escalate further. The market has grown more confident in the Fed’s ability to orchestrate a soft landing, being a normalization of policy without causing a recession. The yield curve between the 2-Year and 10-Year Treasuries signaled just that, steepening overnight after dropping to its lowest spread since early 2020, coming within 38 basis points of inverting.
That said, the market is now more confident in the economic recovery continuing through rate hikes, sapping the metal of its inflation-hedging appeal. Higher rates alone also present an obstacle for the non-interest-bearing asset. The chance for a 50-basis point liftoff at the March FOMC meeting fell to 44.3% from 58.9% a day ago, according to the CME FedWatch Tool. For now, silver’s best hope for a move higher may be an escalation between Russia and Ukraine. Otherwise, prices may shift lower.