Silver prices declined by 1% to ₹2.43 lakh per kilogram on the Multi Commodity Exchange (MCX) on Tuesday. The drop followed rising US Treasury yields and renewed expectations of Federal Reserve interest rate hikes, which overshadowed easing geopolitical tensions in the Middle East, according to livemint.com.
The decline in silver prices came despite a ceasefire between Israel and Iran, which had initially eased geopolitical concerns. Investors remained cautious ahead of upcoming US inflation data, which is expected to influence silver's short-term trajectory. Stronger-than-expected US economic indicators have reinforced market bets that the Federal Reserve may maintain higher interest rates for an extended period, negatively impacting non-yielding assets like silver, livemint.com reported.
Silver, as a non-yielding asset, tends to be sensitive to interest rate movements and bond yields. Rising US Treasury yields increase the opportunity cost of holding silver, leading to price pressure. The current environment, marked by persistent inflation concerns and monetary tightening, contrasts with the recent easing of geopolitical tensions, creating mixed signals for commodity investors. This price movement aligns with broader trends in precious metals amid fluctuating global economic indicators.
The next key market event is the release of US inflation data, which investors will closely monitor for signals on the Federal Reserve's policy direction. Silver's price movement in the coming sessions will likely reflect the market's interpretation of this data and its implications for interest rates and economic growth.