Silver prices extended their decline on Tuesday, near a one-year low as a firmer US dollar weighed on the metal ahead of this week’s central-bank meetings.
The move extends last week’s losses and reflects a challenging monetary policy backdrop.
The Federal Reserve is expected to leave interest rates unchanged tomorrow, but expectations for further tightening over the coming months continue to support the dollar and provide a floor for yields, reducing silver’s appeal.
Thursday’s PCE inflation report could therefore be important. Another firm reading would reinforce tightening expectations and risk extending the decline, while softer data could offer some relief.
Geopolitics adds to the bearish pressure. Continued tensions in the Middle East are keeping oil prices elevated despite ongoing diplomatic efforts. Higher energy costs could sustain inflation concerns. At the same time, it weakens the growth outlook and potentially weighs on silver’s industrial demand, leaving the metal exposed to the downside if geopolitical risks persist.
The physical market offers limited support for now. Comex inventories and London vault holdings continue climbing, suggesting that immediate availability remains comfortable. India provides a potential counterweight after approving permits for roughly 6,500 tonnes of imports over the next six months following restrictions since May, although domestic demand remains weak. A meaningful recovery in Indian buying could help absorb part of the available supply and limit further downside, although it may not be enough to offset a persistently restrictive global interest rate backdrop.
