Inflation and Fed expectations determine sentiment
The November Consumer Price Index (CPI) showed an annual increase of 2.7%, with core inflation standing at 3.3%, in line with market expectations. The producer price index (PPI) indicated an increase of 3% year-on-year, reinforcing hopes that inflationary pressures are gradually easing. These reports confirmed the likelihood of a 25 basis point rate cut at next week’s Federal Reserve meeting, the third cut this year.
However, inflation remains above the Federal Reserve’s 2% target, signaling a possible pause in aggressive easing in 2024. Market participants are awaiting new guidance on the Fed’s 2025 outlook, adding to uncertainty.
The strength of the dollar and government bond yields are creating pressure
A stronger US dollar, buoyed by the best weekly performance in a month, weighed on silver prices. Rising government bond yields also caused problems: the ten-year yield rose to 4.40%. These factors increase the appeal of interest-bearing assets relative to silver.
Safe haven demand provides support, but industrial weakness limits gains
Geopolitical uncertainties, including discussions about a ceasefire in Gaza, supported silver’s appeal as a safe haven. However, global industrial demand for silver remained subdued, limiting upward price momentum. Central banks have prioritized gold purchases, further limiting silver’s gains.
Silver ends lower as inflation numbers and Fed uncertainty loom
The silver market fell lower as it struggled to build momentum despite a supportive macroeconomic environment. Investors remain cautious and focus on upcoming economic data and signals from the Federal Reserve for clearer direction.
Next Week’s Forecast: Fed Meeting and PCE Data in Focus
All eyes will be on the Federal Reserve meeting on December 17 and 18, where a 25 basis point rate cut is widely expected. The accompanying Summary of Economic Projections and comments from Chairman Jerome Powell will be critical to understanding how the Fed plans to balance inflation risk and growth in 2025.