Domestic silver prices
As of 9:15 am on May 20, the price of 999 silver (1 tael) of DOJI Jewelry Group Joint Stock Company was listed at 2.767 - 2.868 million VND/tael (buying - selling); down 9,000 VND/tael on the buying side and down 93,000 VND/tael on the selling side compared to yesterday morning.
At the same time, the price of 999 silver bars (1 tael) at Phu Quy Jewelry Group was listed at the threshold of 2.782 - 2.868 million VND/tael (buying - selling); down 9,000 VND/tael on the buying side and down 93,000 VND/tael on the selling side compared to yesterday morning.
The price of 999 silver ingots (1kg) at Phu Quy Jewelry Group is listed at 74.186 - 76.479 million VND/kg (buying - selling); down 2.4 million VND/kg on the buying side and down 2.48 million VND/kg on the selling side compared to yesterday morning.
World silver price
On the world market, as of 9:25 am on May 20 (Vietnam time), the world silver price was listed at 74.06 USD/ounce; down 2.22 USD compared to yesterday morning.
Causes and forecasts
According to precious metals analyst James Hyerczyk of FX Empire, the main reason for the recent weakening of silver prices comes from changes in the policy expectations of the US Federal Reserve (Fed).
Earlier this year, the market once expected the Fed to cut interest rates soon. However, the context has now changed as the futures contract market is assessing the possibility of the Fed raising interest rates by the end of this year at around 50/50, even some forecasts suggest that this possibility may be even higher next year.
According to Mr. Hyerczyk, investors usually do not wait until official policies change to adjust their portfolios. Instead, they trade based on expectations about what will happen in the future. Currently, the market is leaning towards the scenario of interest rates remaining at a higher level longer than expected. Meanwhile, the previous silver price was built on the opposite assumption, causing the upward momentum to gradually be broken.
Besides pressure from monetary policy, the strengthening USD is also putting significant pressure on the silver market. High interest rate expectations have boosted cash flow back to USD-denominated assets, pulling the US Dollar Index back.
Because silver is traded globally in USD, the appreciation of the greenback makes buyers using the euro, Japanese yen or other currencies have to spend more money to buy the same amount of silver. This weakens international demand and increases selling pressure in the silver market.
FX Empire experts believe that silver prices are currently not only affected by one factor but are also facing three major pressures including high interest rate expectations, increased bond yields and a stronger USD.
He also believes that market psychological factors are making the correction momentum stronger. In the period from March to May, silver prices increased sharply thanks to a series of supporting stories such as demand for artificial intelligence (AI), energy transition and high-tech manufacturing. Many investors have flocked to the market with the expectation that prices will continue to rise.
However, when the interest rate story reversed, profit-taking activities took place quickly. According to Mr. Hyerczyk, it is not that the prospect of a long-term shortage of silver supply is wrong, but the problem lies in the fact that too many investors participate in the same trading trend, making the market easily fluctuate strongly when psychology changes.
However, the fundamental factors of the silver market have not changed significantly. Industrial demand from the solar panel, electronics and technology manufacturing sectors continues to exceed supply growth, causing the silver market to remain in a state of shortage.
However, in the short term, the market is currently almost completely focused on the Fed's policy instead of the supply-demand story. According to this expert, the expectation that monetary policy is leading short-term price fluctuations, while the supply shortage only plays a supporting role in the long term.
The Fed is currently the most important story for silver" - Mr. Hyerczyk emphasized. Maintaining high inflation makes the possibility of interest rate hikes still present, thereby keeping bond yields high and continuing to support the USD. As the USD strengthens, spot silver prices will continue to bear downward pressure. According to his assessment, this chain of impacts is still operating and there is no clear signal enough to reverse direction in the short term.
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