Silver Prices Weaken to Three-Month Low Near $29.50
Silver (XAG/USD) prices extended their decline for the sixth straight session, trading around $29.50 per troy ounce during Asian trading hours on Thursday (12/19). The grey metal depreciated more than 3% following the release of the Federal Reserve's (Fed) interest rate decision on Wednesday.
The Federal Reserve (Fed) delivered a 25 basis point (bps) interest rate cut at its December meeting, bringing its benchmark lending rate to a range of 4.25%-4.50%, the lowest level in two years. Additionally, during the Press Conference, Fed Chair Jerome Powell made it clear that the Fed would be cautious about further cuts as inflation remains above the central bank's 2% target.
The Summary of Economic Projections, often referred to as the "dot plot," now anticipates only two interest rate cuts in 2025, down from the four projected in September. This adjustment is likely due to strong GDP growth and persistent inflation in the United States (US). Higher long-term interest rates tend to have a negative impact on demand for non-yielding assets such as Silver.
Traders are likely to eye the weekly US Initial Jobless Claims, Existing Home Sales, and the final reading of Annual Gross Domestic Product for the third quarter (Q3) due on Thursday. These data points could further shape Fed monetary policy expectations.
Additionally, the Bank of Japan kept its policy rate unchanged for the third straight meeting, maintaining the short-term interest rate target in the 0.15%-0.25% range after its two-day monetary policy review, in line with market expectations. Traders expect the Bank of England (BOE) to keep interest rates unchanged later in the day.
Furthermore, the industrial outlook for Silver appears limited due to overcapacity in China’s solar panel industry, which has prompted photovoltaic companies to join the government’s self-discipline program to regulate supply.
Source: FXStreet
