Silver above $31 on Russia-Ukraine escalation

Silver is retracing its recent losses from the previous session, with XAGUSD trading around $31.00 in early Asian hours on Thursday. The rise in precious metal prices is attributed to safe-haven flows amid escalating tensions in the Russia-Ukraine war.

On Wednesday, Ukraine launched a volley of British Storm Shadow cruise missiles into Russia, marking the latest deployment of western weaponry against Russian targets. This follows Ukraine’s use of US ATACMS missiles the previous day.

According to a Reuters report, video footage posted by Russian war correspondents on Telegram showed black smoke rising in a residential area of the Kursk region, which borders northeastern Ukraine.

At least 14 large explosions were heard, most preceded by the sharp whistle of what sounded like incoming missiles. Moscow has stated that the use of western weapons to strike Russian territory far from the border would significantly escalate the conflict.

However, silver has been under pressure due to a bleak outlook for the metal’s industrial use.

On Wednesday, the People’s Bank of China (PBoC) Monetary Policy Committee (MPC) decided to keep the benchmark interest rate at 3.1% for November. Higher interest rates in China, a major global manufacturing hub for electronics, solar panels, and automotive components, are expected to dampen industrial demand for silver.

Furthermore, market expectations indicate that the incoming Donald Trump administration will spur inflation, which could slow down the Federal Reserve’s rate cut trajectory, thus exerting downward pressure on non-interest-bearing assets like silver.

(Source: OANDA)