Fed’s First Rate Hike Since 2023 Puts Silver Under Pressure

The Federal Reserve raised its benchmark interest rate by a quarter point on September 16, lifting its target range to 3.75% to 4%. It was the Fed’s first increase since 2023, and the decision puts fresh pressure on silver, which pays no interest.

The Fed said inflation remained elevated and economic activity was expanding at a solid pace. Higher rates can make interest-bearing assets more appealing than metals, while a stronger U.S. dollar can make dollar-priced silver costlier for buyers abroad.

Silver’s price was mixed after the decision. FXStreet reported spot silver at about $65.85 an ounce on September 22, down 0.38% for the day, as investors considered the prospect of further rate increases.

That prospect is already on traders’ radar. FXStreet reported that 16 of 18 Fed policymakers expected at least one more increase this year, while markets were pricing in close to a 90% chance of another hike.

The rate path is not the only influence. Fed officials have warned that inflation may reflect strong demand as well as higher energy costs. Falling oil prices, by contrast, could ease inflation worries and reduce pressure for more tightening.

Silver also has uses beyond investment. Manufacturers rely on it in electronics and solar equipment, so demand from industry can help support prices even when higher rates weigh on precious metals.

Investors will watch inflation readings, the dollar, oil prices and Fed officials’ next comments for clues about the timing of another move. A softer inflation outlook could ease the rate headwind; persistent price pressure could keep it in place.