- Silver prices are losing ground on concerns over whether China’s stimulus plans will be enough to boost demand.
- The PBOC has cut the required reserve requirement ratio by 50 basis points and the seven-day repo rate from 1.7% to 1.5%.
- La Plata, considered a safe haven, could regain ground due to rising tensions in the Middle East.
Silver (XAG/USD) price is retracing its recent gains from the previous session, trading around $31.80 during European hours on Wednesday. Prices of the grey metal are depreciating as traders reassess the effectiveness of China’s stimulus plans in significantly boosting its economy, the world’s largest metal market.
Silver metal is vital to several industrial sectors, including electronics, solar panels and automotive components. As one of the world’s largest manufacturing hubs, China’s industrial demand for silver plays a significant role in driving global consumption of the precious metal.
On Tuesday, People’s Bank of China (PBOC) Governor Pan Gongsheng announced that China will cut the required reserve requirement ratio (RRR) by 50 basis points (bps). Gongsheng also noted that the central bank would reduce the seven-day repo rate to 1.5% from 1.7%, and reduce the down payment for second homes from 25% to 15%.
However, JP Morgan, in a note, advised investors to monitor commodities and bond yields in light of the positive market outlook following China’s stimulus proposals on Tuesday. The bank stressed that global growth has received a new boost from China, a factor that has been absent in recent years. This development notably reduces the risk of a recession and is seen as supportive for markets. However, JP Morgan also warned about the potential risk of re-inflation.
The downside risk for safe-haven silver could be limited due to rising tensions in the Middle East. An Israeli airstrike in Beirut killed a senior Hezbollah commander on Tuesday, raising concerns of a possible full-scale war as cross-border rocket attacks intensified. Hezbollah confirmed on Wednesday that senior commander Ibrahim Qubaisi was killed in Israeli airstrikes in the Lebanese capital, as previously reported by Israel, according to Reuters.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
