Silver price hits multi‑month low as Fed hike expectations, safe-haven demand weigh

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Silver (XAG/USD) extends its bearish move on Thursday and trades around $63.00, down 0.58% on the day at the time of writing.

Silver falls to its lowest level since March 23, losing 0.58% on the day to near $63.00.
Rising expectations of Fed rate hikes continue to pressure non-yielding precious metals.
Escalating US-Iran tensions are supporting the USD more than traditional safe-haven assets.

Silver (XAG/USD) extends its bearish move on Thursday and trades around $63.00, down 0.58% on the day at the time of writing. The white metal remains under pressure as investors reassess the outlook for US monetary policy following another round of strong inflation data and a worsening geopolitical backdrop in the Middle East.

The decline in Silver comes as markets increasingly favor the US Dollar (USD) as the preferred safe-haven asset. Despite escalating tensions between Washington and Tehran, defensive flows are shifting toward the Greenback, supported by rising US Treasury yields.

United States (US) President Donald Trump said on Thursday that the US would hit Iran “very hard tonight,” increasing concerns about a further military escalation and its implications for energy markets. Oil prices have remained elevated since the start of the war, fueling concerns about global inflation.

Against this backdrop, investors are increasingly pricing in a more aggressive tightening path from the Federal Reserve (Fed). Inflation data released this week showed persistent price pressures, while the Producer Price Index (PPI) climbed 6.5% YoY in May, its highest level since November 2022. As a result, US yields moved higher, supporting the US Dollar and reducing the appeal of non-yielding assets.

According to the CME FedWatch tool, markets now assign a high chance to at least one Fed rate hike before year-end. This shift is negative for Silver, whose attractiveness tends to diminish when real yields rise.

Analysts at ING also note that precious metals remain closely tied to the direction of US Treasury yields and expectations for Federal Reserve policy. With the US Dollar maintaining its advantage and Treasury yields remaining biased to the upside, Silver continues to face significant selling pressure, while traders remain focused on upcoming US economic data and developments in the Middle East conflict.

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.