Silver price edged higher on Tuesday as the market reacted to the positive Chinese economic data. Optimism over the economy’s recovery is set to continue supporting the asset. Even so, the rebound in Treasury yields and US dollar by extension continue to curb its gains. There is a growing expectation that the Fed may approve a rate increase of 25 basis points in June after the priced one in May.
Chinese economy
Data released earlier on Tuesday by the National Bureau of Statistics showed that the Chinese economy started 2023 on its front foot. This as consumers increased their spending after three years of stringent COVID-19 restrictions.
The country’s GDP grew by 4.5% in Q1’23 compared to a year ago. This beat analysts’ estimate of 4%. Granted, the private sector remains wary of the future. For instance, youth unemployment rose to the second highest level on record.
Even so, consumption rebounded significantly with retail sales surging by 10.6% in March year-on-year. Notably, this is the highest level of growth since 2021. Furthermore, industrial production rose by 3.9% in March; up from 2.4% in the January-February period.
Seeing that China is the leading consumer of industrial metals, the positive economic data yielded support for silver price. Indeed, optimism over China’s recovery has been one of the bullish drivers that have boosted the commodity over the past six weeks. In the ensuing sessions, consumer confidence and pent-up demand may further boost China’s economy and silver price by extension.
US economy
Even with the positive Chinese data, the rebounding of the US dollar continues to curb silver price gains. As a dollar-priced asset, the rebounding of the greenback makes the metal more expensive for buyers using foreign currencies.
Investors expect the Federal Reserve to raise interest rates by 25 basis points in its next policy meeting in early May. Additionally, expectations of a similar increase in June appear to be rising.
The mood regarding the Fed’s policy has largely sustained the rebound in Treasury yields over the past two weeks. Granted, it eased on Tuesday after three consecutive sessions of gains. Besides, the dollar remains under pressure from recent economic data and the persistent recession woes.
