The prices of Silver (SI=F) and Gold Futures (GC=F) took a hard hit on Friday, with Silver falling as steeply as 9% and Gold as far as 3%. Rising yields and a strengthening U.S. dollar contributed to today’s dip, with the former also causing a mass stock market decline.
With higher yields, the opportunity cost of holding silver rises as investors can earn stronger returns from interest-bearing assets like Treasuries. Silver doesn’t pay out interest, making it less attractive in comparison. Silver is also facing pressure from a rising U.S. Dollar Index. As the dollar rises, silver becomes more expensive for foreign buyers, reducing demand.
In addition, the odds of another interest rate cut by the Federal Reserve are quickly declining. The latest Consumer Price Index report did the country’s battle against inflation no favors, instead indicating that inflation rose. Further, the odds of an interest rate hike this Summer are up, which would create a tougher market for precious metals, specifically Silver.
Also Read: US Stocks Panic as Bond Market Surges, Indexes Slip
Furthermore ANZ Group Holdings Ltd. analysts Daniel Hynes and Soni Kumari, who said “inflation expectations, higher yields and a stronger dollar are likely to keep gold under pressure in the near term.” ANZ also said “stronger-than-expected rise in consumer and producer prices raised concerns that the Fed may need to increase interest rates in the short term,” as higher interest rates typically correlate with lower metals prices.
Gold and silver prices are still a ways off from the record-high prices of about $5,600 and $120, respectively, that they reached in January. Based on current price trajectory, it is a stretch to predict that the prices of both precious metals will reclaim these highs in the coming months, especially if inflation doesn’t cool soon.