Silver (XAG/USD) extended its correction on Wednesday, trading around $58.75 at the time of writing, marking a sharp decline of 4.62% on the day and hitting a new low not seen since December 2025 [1]. This significant drop comes amid heightened expectations for a more restrictive monetary policy stance from the Federal Reserve (Fed), which has delivered a distinctly hawkish message at its latest meeting. According to the CME FedWatch tool, investors are now assigning a high probability to a rate hike before the end of the year [1].
The strengthening US Dollar, supported by these rate hike expectations, has put additional pressure on dollar-denominated precious metals like Silver, making them more expensive for international buyers and reducing their appeal as non-yielding assets [1]. US Treasury yields have also moved higher as investors adjust to persistent inflation risks, with concerns about elevated energy costs and the resilience of the US economy leading to diminished hopes for a near-term easing cycle [1].
Market participants are now closely watching the upcoming release of the Personal Consumption Expenditures (PCE) Price Index, scheduled for Thursday. Stronger-than-expected inflation data could reinforce expectations of further monetary tightening by the Fed, potentially adding to the downside pressure on Silver. Conversely, softer inflation figures may provide some relief and help stabilize Silver prices following the recent sell-off [1].
CONCLUSION
Silver has experienced a sharp decline, reaching a new yearly low as the market reacts to the Fed's hawkish stance and rising rate hike expectations. The upcoming PCE inflation data is likely to play a pivotal role in determining whether Silver's downward momentum continues or stabilizes in the near term.