Silver fell 3.20% on Thursday, with XAG/USD trading near $84.70. The drop followed a recent rise, with profit-taking during a reassessment of the Federal Reserve’s policy path.
Higher US Treasury yields and a stronger US Dollar reduced demand for non-yielding metals. Markets also factored in hawkish Federal Reserve messaging and expectations of higher rates for longer.
US inflation data continued to point to persistent price pressures, while labour market conditions stayed relatively stable. This reduced the near-term case for monetary easing.
Kansas City Fed President Jeffrey Schmid said continued inflation remains the most important risk to the economy. He also said elevated oil prices are affecting household spending and business costs.
Silver is often used as a store of value and can be bought as coins, bars, or via exchange traded funds that track prices. Its price can be affected by US Dollar moves, interest rates, geopolitical risk, mining supply, and recycling.
Industrial demand from sectors such as electronics and solar energy can move prices, alongside conditions in the US, China, and India. Silver often tracks gold, and the gold/silver ratio is used to compare relative valuations.
With the US 10-year Treasury yield pushing above 4.75%, non-yielding assets like silver are becoming less attractive for us to hold. The Federal Reserve is signaling it will keep interest rates higher for longer, especially after last week’s Consumer Price Index report came in hot at 3.8%. This hawkish stance is putting direct pressure on silver’s price.
Given this downward momentum, we see an opportunity for bearish derivative plays, such as buying puts or establishing short futures positions. The recent rally that pushed silver toward $88 now appears overextended, and this pullback to the $84 level feels justified as traders cash in their profits. We are watching for the price to test a key support level around $82.50 in the next few weeks.
The US Dollar Index holding firm above 106 adds another layer of pressure, as a strong dollar makes silver more expensive for buyers using other currencies. Looking back at the dovish pivot we had anticipated throughout 2025, the current reality of stubborn inflation is forcing a major repricing across the precious metals market. This environment favors short-term strategies that benefit from continued dollar strength.
We are also paying close attention to the Gold/Silver ratio, which has climbed back to 85:1. This widening ratio shows that silver is underperforming gold, a classic sign of a risk-off sentiment where investors prefer gold’s relative safety. A reversal in this ratio could be an early indicator that the sell-off in silver is losing steam, but we are not seeing that signal yet.
On the industrial side, we must remember that demand for silver in sectors like solar energy remains robust. Recent reports showing a 15% year-over-year increase in global solar panel installations provide a strong long-term floor for silver prices. However, in the immediate weeks, this fundamental support is being overshadowed by the macroeconomic headwinds from interest rate policy.
