Silver tumbles below $65 as hawkish Fed and fading war premium pressure metals

Silver has extended a steep decline, falling below $65 an ounce on Friday and heading for a weekly loss of around 5%, as a hawkish turn from the US Federal Reserve overwhelmed the bullish narrative that had powered the metal to record highs earlier in the year. The slide marks a dramatic reversal for an asset that, only months ago, was one of the standout performers across global markets.

The proximate trigger was the central bank's policy meeting. The Fed left its benchmark rate unchanged in a range of 3.5% to 3.75%, but the accompanying message landed with a hawkish thud: roughly half of policymakers signaled that at least one rate increase could be warranted later this year, and new Fed Chair Kevin Warsh used his debut press conference to stress that price stability remains the institution's guiding principle, noting that inflation has run above the 2% target for several years. For a non-yielding asset like silver, the implication is direct, since higher-for-longer interest rates raise the opportunity cost of holding metals that pay no income.

Compounding the pressure, the signal pushed the US dollar higher and lifted Treasury yields, a combination that tends to weigh on dollar-priced precious metals. At the same time, the near-final peace agreement between the United States and Iran has drained much of the inflation-hedge and safe-haven demand that had supported silver during the height of the conflict, as falling oil prices ease the very inflation fears that once made the metal attractive.

The scale of the unwind is striking. Silver had surged from roughly $40 to a peak above $121 an ounce over the span of about fourteen months, a run built largely on expectations of looser monetary policy and a weaker dollar, reaching an all-time high near $121.62 in late January. The shift to a hawkish regime has cut directly against those assumptions, and because silver tends to amplify gold's moves in both directions, it has fallen harder than its yellow counterpart, which has itself slipped as banks trim their forecasts.

Beyond monetary policy, the metal faces fundamental headwinds. Analysts at one major bank recently cut their forecast for silver investment demand, citing softer industrial appetite and rising supply, while India moved to curb nearly all silver imports in an effort to ease pressure on its currency, a step that could dampen one source of global demand even as it tightens local supplies.

Not everyone is bearish over the longer horizon. Some analysts continue to point to a structural supply deficit projected for this year and to robust demand from the solar and electric-vehicle sectors as reasons the metal should find support and avoid a deeper collapse. The gold-to-silver ratio, a closely watched gauge of relative value, sits near 60, within range of its long-run average, leaving room for debate over whether silver is now cheap or simply repricing to a higher-rate world.

For now, the near-term tape is being dictated by the Fed and the fading war premium rather than by silver's industrial story. With key inflation data due next week and the central bank's hawkish stance still fresh, traders are likely to keep one eye on yields and the dollar, the two forces that have turned a runaway rally into one of the sharper corrections the metal has seen this year.