Silver prices rose in European trade on Friday on track for the third profit in a row, hitting a one-week high and on track for a weekly profit as US 10-year treasury yields declined.

Demand in China is expected to improve, after strong data showed Chinese industrial production rebounded in November.

Silver Prices Today 

Silver prices rose 0.45% to $24.29 an ounce, the highest since October 6, with a session-low at $23.99, after closing up 1.55% on Thursday, as dollar and US yields decline. 

Weekly Trades 

The white metal is up 5.5% so far this week, on track for the fourth weekly profit in the last five weeks.

US Treasury Yields 

US 10-year treasury yields fell 0.4% on Friday on track for the fourth loss in a row, almost touching five-month lows at 3.887% and boosting non-yielding assets. 

Such developments came after the Federal Reserve announced the end of the current cycle of policy tightening and preparation for interest rate cuts in 2024.

Fed Chair Jerome Powell said that historic US policy tightening is over with policymakers now discussing upcoming interest rate cuts.

Chinese Demand 

Chinese data showed a surge of 6.6% in industrial output in November, the best pace in two years, beating estimates of 5.7%.

As China's economy rebounds, and the government provides fresh stimuli, demand on precious metals such as silver and gold is expected to grow accordingly. 

Gold prices rose in European trade on Friday, maintaining gains for the third straight session and heading for weekly gains after piercing above $2000.

Gold's gains come following the Federal Reserve's policy meeting, at which it announced the end of the current cycle of policy tightening with discussions starting on the first interest rate cut in 2024.

Gold Prices Today

Gold prices rose 0.2% to $2,039 an ounce, with a session-low at $2,031, after closing up 0.4% on Thursday, the second profit in a row as both the dollar and US treasury yields declined. 

Weekly Trading

Gold prices are up 1.75% so far this week on track for the fourth weekly profit in the last five weeks.

Gold is resuming its streak of weekly gains after a dip in the previous week away from a record high at $2146. 

Fed Meeting 

As expected, the Federal Reserve voted this week to maintain interest rates at below 5.5%, already the highest since 2001.

The Fed said in its official statement that economic activities slowed down after strong growth in the third quarter, with the labor sector moderating a bit, while unemployment remained lower.

The Fed believes inflation to still remain high, adding it'll continue to monitor data and conditions to gauge the appropriate policy response.

Fed Chair Jerome Powell clearly said the Fed is close to ending the current cycle of policy tightening, but he left all options open.

The quarterly economic outlook report by the Fed had a few important revisions:

The Fed expects 2.6% growth rate this year, up from 2.1% in September forecasts, while expecting 1.4% growth rate in 2024, down from 1.5% in September forecasts.

The Fed expects total inflation at 3.2% this year, and 2.4% next year, down from 2.5%, while expecting a 2.2% inflation rate in 2025.

As for interest rates, the Fed changes prospects for US interest rates this year down from 5.75% to 5.5%, while expecting rates in 2024 at 4.75%, then at 3.75% in 2025.

US Rates

Following the meeting, the odds for a US 0.25% interest rate cut at the Fed March 2024 meeting surged to 87%, while odds for such a cut in May surged to 99%.

SPDR

Gold holdings at the SPDR Gold Trust fell 0.29 tonnes yesterday to a total of 877.67 tonnes. 

Sterling edged up in European trade on Friday against a basket of major rivals, maintaining gains for the fifth straight session against the dollar and almost touching four-month high following Bank of England's policy meeting yesterday.

The BOE took a more bullish stance than expected, hurting the odds for early UK interest rate cuts in 2024. 

GBP/USD 

GBP/USD rose 0.1% to 1.2774, with a session-low at 1.2747, after closing up 1.2% on Thursday, the fourth profit in a row, and the largest since November 14, marking a four-month high at 1.2794. 

BOE

As expected, Bank of England voted to hold interest rates flat this week at 5.25%, already the highest in 15 years.

It was a 6 against 3 voting balance in favor of maintaining rates, with 3 members voting in favor of raising interest rates, an unexpected result. 

BOE said that interest rates need to remain tight for an extended duration to control inflation, while opening the way for more interest rate hikes if data proved necessary. 

Bank of England Governor Andrew Bailey said the road remains long in order to control and subdue inflation.

He said it's too early to talk about interest rates peaking, or about UK rate cuts. 

UK Rate Outlook

The meeting hurt the odds of early interest rate cuts by Bank of England in 2024 following the bullish remarks.

Markets now await crucial UK inflation data for November next week to gauge the likely path ahead for policies. 

Euro fell in European trade on Friday against a basket of major rivals, falling off two-week high against the dollar on profit-taking, as investors shun risks ahead of major European data for December. 

The common currency is heading for a weekly profit on hopes the current gap of US-European interest rates will diminish soon. 

EUR/USD

EUR/USD fell 0.15% to 1.0977, with a session-high at 1.1004, after rallying 1.1% on Thursday, the fourth profit in a row, and the largest since mid-November, scaling one-week high at 1.1009. 

Major Sectors 

Investors a batch of crucial European data later today to gauge the performance of the euro zone economy in the fourth quarter. 

The euro zone economy experienced a heavy contraction in the third quarter due to lower consumer spending, and a slowing Chinese economy. 

Weekly Trades 

Euro is up 2% so far this week against the dollar, on track for the first weekly profit in three weeks, and the largest since July.

ECB

As expected, the European Central Bank voted to maintain interest rates unchanged at 4.5% this week, already the highest in 22 years.

The ECB said that while inflation has receded in recent months, it could rebound again in the short term. 

The ECB will hold onto current interest rate levels until inflation is brought back towards 2%. 

It asserted that policy decisions will rely on upcoming data and inflation dynamics in upcoming months.

ECB President Christine Lagarde said the time is still not right to talk about cutting interest rates as inflation is still not consistently moving lower. 

She added the ECB needs to monitor further data on wages and prices before taking new policy decisions. 

European Rate Outlook

Following the meeting, the markets reduced the odds for interest rate cuts expected in the euro zone next year from 160 basis points to less than 150 basis points.

Interest Rate Gap 

The current European-US interest rate gap stood at 100 basis points, the lowest since May 2022, and is expected to shrink further in March 2024 when the Federal Reserve is expected to issue its first interest rate cut. 

The ECB's position this week was more bullish than expected, reducing the odds for European interest rate cuts during the first half of 2024.

Conversely, the Fed openly started discussions about the next interest rate cut, with markets betting on the March meeting as the timing of the first such cut.