Strong US Dollar Limits Silver Up
The US Dollar Index (DXY) held firm at 106.88, supported by resilient economic data and high government bond yields. Rising U.S. retail sales, which rose 0.7% in November, exceeded expectations and underlined the strength of consumer spending. This strengthened the dollar’s appeal, making silver, which is priced in dollars, more expensive for non-dollar holders.
Government bond yields put further pressure on silver, with the benchmark 10-year yield rising to 4.40%. Higher yields increase the opportunity cost of holding non-yielding assets like silver, decreasing investor demand.
The Fed’s policy meeting determines the short-term rate
Investors’ attention now shifts to the Federal Reserve’s upcoming policy statement and its economic projections. While the Fed is widely expected to keep rates steady, its tone on future easing will be critical. Markets currently estimate a 97% chance of a 25 basis point rate cut next year, but the likelihood of an earlier move remains low.
An aggressive stance from Fed Chairman Jerome Powell, combined with solid economic performance, could maintain pressure on silver. Conversely, any easing signals could soften dollar strength and provide some support to precious metals.