Silver Drops Nearly 15% Amid Strong Dollar and Hawkish Fed Outlook

New York | EcoPulse24
Silver prices experienced a sharp decline during Thursday’s trading, falling by approximately 14.94% and stabilizing near $75 per ounce. This marks one of the most significant downturns in recent months, as renewed selling pressure and heightened volatility returned to precious metals markets. The drop followed a failed two-day rebound, with buyers unable to sustain momentum despite relatively attractive price levels, reigniting concerns about a continued correction in silver and other metals.

The price decline coincided with a stronger US dollar, bolstered by more hawkish signals from the Federal Reserve and market expectations for a slower pace of US interest rate cuts in the coming period. Investors also repriced risks associated with the potential nomination of Kevin Warsh as Fed Chair, given his advocacy for reducing the central bank's balance sheet and a less accommodative approach to rate cuts.

On the geopolitical front, easing tensions between the US and Iran reduced safe-haven demand. A new round of talks is scheduled for Friday, with Tehran seeking to focus on the nuclear issue, while Washington aims to broaden discussions to include ballistic missiles, regional groups, and human rights, temporarily lowering the risk premium in markets.

EcoPulse24 Analysis:
This sharp silver sell-off underscores the fragility of recent recovery attempts in the metals market. In the short term, prices remain more influenced by monetary policy and dollar strength than by industrial demand fundamentals. With geopolitical risk receding and caution surrounding the US rate outlook, silver may continue to face volatility pending clearer signals from the Fed or renewed global tensions that could boost safe-haven demand.

How does a stronger dollar affect metals demand and pricing?
A rising dollar directly impacts metal prices, as gold, silver, and copper are priced globally in US dollars. When the dollar strengthens, these metals become more expensive for investors and consumers using other currencies, leading to weaker external demand. This effect is particularly pronounced in emerging markets and metal-importing countries, where higher purchase costs curb consumption and investment, driving prices lower even if supply fundamentals remain unchanged.

How does a hawkish Fed impact metals demand and pricing?
A more restrictive Fed policy - by keeping rates high or delaying cuts - boosts the appeal of yield-bearing assets like US Treasuries and raises the opportunity cost of holding non-yielding metals. As real yields increase, investors redirect liquidity from metals to fixed-income instruments, reducing investment demand and pressuring prices. Hawkish monetary policy also strengthens the dollar, compounding the negative impact on global metals pricing.