Silver Weakens as Yields and the Dollar Pose Formidable Headwinds

Silver prices fell sharply during Monday's European session, with XAG/USD trading around US$62.34 per troy ounce. Silver dropped approximately 3.3% amidst broad pressure on precious metals, driven by rising expectations of a Federal Reserve interest rate hike this week.

The primary pressure stems from a strengthening US dollar. The US Dollar Index rose nearly 0.5% to 99.59—its highest level since September 2—as investors sought refuge in the greenback after renewed Middle East conflict drove up oil prices and weighed on global market sentiment.

Fed interest rate expectations are also weighing heavily on silver. Following hot US inflation data and an energy price rally, markets are increasingly pricing in a 25-basis-point rate hike at this week's Fed meeting. This environment makes non-yielding precious metals like silver less attractive compared to interest-bearing assets.

On the energy front, oil prices surged again as fresh Houthi attacks on Saudi Arabia, an Iranian attack on a vessel in the Gulf region, and the shutdown of a major Saudi oil pipeline heightened supply concerns. This spike in oil prices risks keeping inflation elevated and prompting central banks to maintain a hawkish stance.

In terms of trends, silver remains under pressure; having traded at US$64.60 on Friday, it has now slipped to the US$63.22 level. Year-to-date, silver prices have weakened by approximately 11.06%, indicating that medium-term momentum has yet to fully recover.

Newsmaker Analysis: The weakness in XAG/USD suggests the market is focusing more on the risk of a Fed rate hike, a stronger US dollar, and high yields rather than safe-haven appeal. As long as silver remains capped below the US$64.60–US$65.00 zone, the short-term bias remains bearish. Immediate support lies around US$63.00, followed by US$62.20. However, if the Fed signals a more cautious stance or the US dollar weakens following the interest rate decision, silver has the potential to rebound to the US$64.60 level. (arl)

Source: Newsmaker.id