During the European trading session on Monday, silver prices extended their losses to near $30.20 per troy ounce. The depreciation in the price of the grey metal followed the release of US Personal Consumption Expenditure (PCE) data on Friday, which indicated a easing of price pressures in April.
Fed’s Tight Policy Stance Weighs on Silver
The Federal Reserve (Fed) may require more time to achieve its 2% inflation target, as the mixed inflation data did not create an atmosphere conducive to a rate cut from the central bank. The prospect of higher interest rates is negatively impacting non-yielding assets like silver.
Furthermore, Fed representatives suggested last week that the central bank might maintain its tight policy stance for a prolonged period to reach its inflation target. Atlanta Fed President Raphael Bostic emphasized in an interview with Fox Business that the Fed must persist with a restrictive approach and that the forecast for inflation will gradually decrease. Similarly, New York Fed President John Williams stated that while current inflation levels are elevated, he believes the Fed’s present policy is well-positioned to gradually bring price increases back to the Fed’s target.
Silver Weakens Amid Shift in Risk Sentiment
The safe-haven appeal of silver weakened as investors potentially shifted towards other riskier assets following Israeli Prime Minister Benjamin Netanyahu’s administration’s reluctant acceptance of US President Joe Biden’s proposal for a Gaza cease-fire on Sunday. This decision came amidst ongoing attacks in Rafah, stemming from intense Israeli bombings over the weekend, according to the BBC.
