Silver (XAG/USD) traded around $64.85 on Friday, marking a decline of 1.31% for the day and extending its losses for a third consecutive session [1]. The ongoing pressure on silver prices is attributed to a combination of a hawkish stance from the Federal Reserve and easing geopolitical tensions in the Middle East [1]. At its June meeting, the Federal Reserve kept interest rates unchanged but indicated that several policymakers are still in favor of an additional rate hike before the end of the year [1]. This has led traders to increase their expectations for higher interest rates to persist, diminishing the appeal of non-yielding assets such as silver [1].
The CME FedWatch tool reflects a high probability of a rate hike in the coming months, and newly appointed Fed Chair Kevin Warsh reiterated the central bank’s commitment to returning inflation to its 2% target, reinforcing expectations for a more restrictive monetary policy [1]. On the geopolitical front, the safe-haven demand for precious metals like silver has weakened after reports that Israel and Hezbollah agreed to a ceasefire starting Friday afternoon, which has improved risk appetite and reduced defensive demand for silver [1].
While inflation concerns remain due to volatility in energy prices and risks to global oil supply, these factors have not been sufficient to counteract the negative impact of anticipated tighter US monetary policy on silver prices [1]. As a result, silver remains biased to the downside in the near term, with investors closely watching upcoming US economic data and any signals that could confirm or challenge expectations of further Federal Reserve tightening [1].
CONCLUSION
Silver continues to face downward pressure as expectations for prolonged higher US interest rates and easing geopolitical tensions reduce its appeal. Market participants are likely to remain cautious, monitoring US economic data and Federal Reserve signals for further direction.