Silver extends losses as hawkish Fed, ceasefire curb demand

Silver (XAG/USD) trades around $64.85 on Friday at the time of writing, down 1.31% on the day. The white metal remains under pressure for a third consecutive day as investors reassess the outlook for US monetary policy and developments in the Middle East.

Market sentiment continues to be influenced by the hawkish tone adopted by the Federal Reserve (Fed) this week. At its June meeting, the US central bank left interest rates unchanged but signaled that several policymakers still support an additional rate hike before year-end. This stance has led traders to reinforce expectations for higher interest rates for longer, reducing the appeal of non-yielding assets such as Silver.

According to the CME FedWatch tool, markets are now assigning a high chance to a rate hike in the coming months. Newly appointed Fed Chair Kevin Warsh also reiterated the central bank’s commitment to returning inflation to its 2% target, adding to expectations of a more restrictive monetary policy stance.

On the geopolitical front, the traditional safe-haven support for precious metals has weakened after Reuters reported that Israel and Hezbollah agreed to a ceasefire starting Friday afternoon. The development has helped improve risk appetite and reduced defensive demand for Silver.

Inflation concerns also remain in focus due to volatility in energy prices and risks surrounding global Oil supply. However, these factors have not been sufficient to offset the negative impact of expectations for tighter US monetary policy.

Silver, therefore, remains biased to the downside in the near term, with investors closely monitoring upcoming US economic data and any signals that could either confirm or challenge expectations of further Federal Reserve tightening.