Silver prices (XAG/USD) declined to approximately $66.50 per troy ounce during Asian trading hours on Wednesday, following gains registered the previous day [1]. The drop is attributed to the Federal Reserve's hawkish monetary policy stance, as the US central bank recently raised its benchmark interest rate target by 25 basis points to a range of 3.75%–4.00% [1]. Policymakers have signaled the possibility of another rate increase before the end of the year, with the CME FedWatch Tool indicating an 89.2% probability of a December rate hike [1].
The market's focus is also on the upcoming preliminary US PMI data release later on Wednesday, which could further influence silver prices [1]. Despite the current downward pressure, there is potential for silver to regain ground as oil prices stabilize after five consecutive days of losses, which may help ease broader inflation concerns [1]. However, oil prices could face renewed downward pressure due to ongoing diplomatic developments between the US and Iran. US Special Envoy to the Middle East, Steve Witkoff, reported 'lengthy' indirect talks with an Iranian delegation at the United Nations General Assembly, and US President Donald Trump described a meeting with Iranian envoys as 'very good' [1]. Tehran has indicated it could reopen the Strait of Hormuz within seven days if the US eases military pressure and lifts its blockade of Iranian ports [1].
The interplay between monetary policy, geopolitical developments, and commodity prices is creating a complex environment for silver. As a non-yielding asset, silver typically faces headwinds when interest rates rise, and its price is also influenced by the strength of the US dollar and industrial demand [1].
CONCLUSION
Silver prices have come under pressure due to the Federal Reserve's hawkish outlook and expectations of further rate hikes, with markets pricing in a high probability of another increase in December. While geopolitical developments and oil price stabilization could offer some support, the overall sentiment remains cautious as traders await further US economic data.