Key Highlights

  • Silver fell 3.83% on the day to $64.489, though it remains up 46.94% year-over-year.
  • The metal has declined 6.41% over the past month as a stronger dollar pressured precious metals broadly.
  • Stronger than expected US PMI data and hawkish Fed commentary drove dollar strength.
  • Traders are pricing in a near 60% probability of an October rate hike, according to the CME FedWatch Tool.

A sharp pullback tracking gold's decline

Silver tumbled to $64.6 an ounce on Wednesday, falling 3.83% on the day and extending a monthly decline of 6.41%. The move closely tracked a similar pullback in gold, both metals pressured by a stronger US dollar following stronger than expected PMI data that showed US Business activity accelerating for a fourth consecutive month in September, reaching its fastest pace in more than five years.

Despite the sharp near-term decline, silver remains up 46.94% over the past year, reflecting the scale of the metal's rally before this correction began. As a precious metal that, unlike gold, also carries substantial industrial Demand exposure through electronics and renewable energy applications, silver's price action often amplifies moves seen in gold during periods of dollar strength or weakness.

The pullback reflects a broader shift in how markets are pricing Monetary Policy expectations, with implications extending across the precious metals complex rather than being isolated to any single metal.

Hawkish Fed commentary reshapes rate expectations

The central driver behind silver's decline mirrors the dynamic affecting gold: a hawkish shift in Federal Reserve rhetoric. Richmond Fed President Tom Barkin said higher interest rates, along with the prospect of further increases, could help temper Inflation expectations without significantly weakening economic activity, comments that reinforced expectations for continued tightening.

This matters because the Fed raised rates by 25 basis points last week and signaled that another hike could come before year-end. Markets are currently pricing in a near 60% chance of an October increase according to the CME FedWatch Tool, a significant shift that has weighed on non-yielding precious metals, since higher rates increase the Opportunity cost of holding Assets that generate no yield.

Silver's larger daily percentage decline relative to gold reflects a pattern often observed in precious metals markets, where silver, due to its smaller market size and higher volatility, tends to move more sharply than gold in both directions during periods of shifting rate expectations.

Balancing monetary policy headwinds against geopolitical and industrial support

The near-term outlook for silver remains constrained by the same macroeconomic forces pressuring gold, with strong US economic data and hawkish Fed signaling working against precious metals broadly. Should upcoming data continue to support this narrative, further near-term pressure on silver prices is possible.

However, unresolved geopolitical tensions continue to offer a potential offsetting factor. President Trump has threatened further action against Iran while also signaling that a deal could be reached soon amid renewed diplomatic efforts, a dynamic that could reintroduce safe-haven demand if tensions escalate unexpectedly.

Silver's dual role as both a monetary and industrial metal also means its trajectory may be influenced by demand trends in electronics, Solar Energy and other industrial applications, providing a layer of support distinct from gold's more purely monetary profile, even as both metals currently face similar headwinds from dollar strength.

Conclusion

Silver's decline below $65 an ounce reflects the dominant influence of dollar strength and a hawkish Federal Reserve outlook, closely mirroring the pressures affecting gold in the current environment. The metal's sharper daily percentage move relative to gold is consistent with its historically higher volatility, even as both metals remain up substantially over the past year. Silver's path forward will likely depend on how monetary policy expectations evolve alongside any shifts in geopolitical risk or industrial demand trends.