Silver Pressured by Hawkish Fed Outlook

Silver traded near $63 an ounce on Thursday after giving up intraday gains in the previous session, as the US Federal Reserve raised interest rates and signaled another hike before the end of the year. The Fed increased the fed funds rate by 25 basis points to 3.75%-4%, as expected, marking its first rate increase in three years. Fed Chair Kevin Warsh also said inflation remains elevated, while data released last week showed core US inflation rose more than anticipated in August. Meanwhile, precious metals found some support as oil prices retreated amid easing concerns over supply disruptions in the Middle East. Saudi Arabia is aiming to restore around half of its East-West pipeline capacity within days and return it to full operation within six weeks. US Energy Secretary Chris Wright also said that 18 million barrels of crude and petroleum products passed through the Strait of Hormuz earlier this week.

Silver prices were around the $63 per ounce mark on Wednesday, testing their lowest in over one month, after the Federal Reserve delivered a 25bps rate hike. The decision by the US central bank was widely expected following data that reflected high consumer and producer prices, in addition to robust economic growth and low unemployment. Additionally, most FOMC members projected another rate hike this year. Shorter-maturity yields rose to multi-year highs, pressuring bullion prices as markets favor securities that bear yield. Meanwhile, the Bank of Japan is also due to hike its rates this week. In turn, metals with exposure to datacenter development came under pressure as AI model executives voiced concerns over the safety of more intelligent models, risking the speculative demand for compute infrastructure.

Silver prices rose more than 1% to around $64.50 an ounce on Wednesday, as oil prices eased after a two-day rally while investors awaited the US Federal Reserve’s upcoming interest-rate decision for further direction. The Fed is widely expected to raise interest rates for the first time since 2023, with markets pricing in more than a 90% probability of at least a 25-basis-point hike, according to the CME FedWatch Tool. The move could be the first of two rate increases projected for the year, as persistent inflation and heightened tensions in the Middle East add to concerns over rising costs. Meanwhile, several other major central banks are scheduled to announce policy decisions this week. The Bank of Japan is expected to raise interest rates to their highest level in 31 years on Friday, while the Bank of England is widely expected to keep rates unchanged on Thursday, although the decision remains a close call.