The Federal Reserve’s cautious approach to interest rate cuts weighed heavily on silver. Fed Chairman Jerome Powell indicated that only two rate cuts are expected in 2025, down from previous forecasts of four. This pushed the 10-year Treasury yield to 4.57% during the week, before falling to 4.526% towards the end. Rising yields increase the cost of holding non-yielding assets like silver, reducing investor demand.
Could cooling inflation have helped silver?
Although inflation rates showed signs of slowing, silver did not benefit. The personal consumption expenditures (PCE) price index, the Fed’s measure of inflation, rose 0.1% in November, bringing the annual rate to 2.4%, slightly below projections. Still, inflation remains above the Fed’s 2% target, which has led policymakers to increasingly focus on maintaining higher interest rates. This limited silver’s advantage.
Why haven’t geopolitical risks increased silver’s appeal?
While geopolitical risks, including the possibility of a US government shutdown, have persisted, silver has not attracted strong safe-haven demand. Market attention remained focused on economic conditions, particularly the Fed’s policy trajectory and the resulting strength of the dollar and Treasury yields. This suggests that economic concerns are currently driving silver more than geopolitical uncertainties.
Short-Term Outlook: What’s Next for Silver After the Holidays?
The near-term outlook for silver remains bearish, with prices struggling to rise back above $30. A retest of the $29.64 support zone is likely, with potential for further losses towards $26.47 to $26.02 as selling pressure increases. Resistance is firm at $30.44, and any price recovery will depend on upcoming economic data and possible changes in the Fed’s stance.
With the Fed’s recent decisions behind the market, silver’s price will be determined by incoming economic reports. After the Christmas and New Year holidays, traders will focus on US jobs data and inflation figures to anticipate the Fed’s next move. These indicators will influence Treasury yields and the dollar, which in turn will play a major role in silver price action.
More information in our Economic Calendar.