Silver Price Declines As Fed Caution, Higher-For-Longer Rate Fears Weigh

• Silver remains under pressure despite a brief recovery attempt earlier in the day. 

• Markets adopt a cautious stance ahead of the US monetary policy decision.

• Geopolitical tensions and rising inflation expectations support a higher-for-longer rate environment.

Silver (XAG/USD) declines and trades around $72.30 on Wednesday at the time of writing, down 1.02% on the day, after failing to establish a sustained move above the $74.00 area. The rebound from recent lows near $72.00 remains limited, highlighting a lack of bullish conviction in a market dominated by caution ahead of the Federal Reserve (Fed) decision.

The US Dollar (USD) maintains a moderately bullish bias, supported by expectations of a still-restrictive monetary policy stance. Investors remain sidelined ahead of the Fed decision, which is widely expected to leave interest rates unchanged within the 3.5%-3.75% range. Attention is now focused on Chair Jerome Powell’s speech, which could shape expectations regarding the future path of interest rates.

Higher-for-longer rate expectations continue to weigh on precious metals, including Silver, by increasing the opportunity cost of holding non-yielding assets. Rising Bond yields, fueled by persistent inflation concerns, reduce the appeal of the white metal for investors.

The geopolitical backdrop adds further pressure. Escalating tensions between the United States (US) and Iran, particularly around the Strait of Hormuz, are fueling concerns over energy prices and reinforcing inflation expectations. According to the Wall Street Journal, the US administration is considering extending the economic blockade against Iran, a move that could keep Oil prices elevated and complicate the task of central banks.

In this environment, the near-term outlook for Silver remains fragile. Analysts at TD Securities note that the metal could face further downside if inflation slows economic growth while keeping rates elevated. They highlight that weaker industrial demand, combined with higher carry costs, may continue to weigh on prices before a potential recovery later in the year as supply constraints re-emerge.