Silver ETFs Experience Significant Decline Amid Precious Metal Price Slump Fuelled by Rising Federal Reserve Rate Hike Projections
Silver and Gold Prices Plummet Amid War-Driven Inflation Fears
On May 15, silver ETFs suffered significant losses, with the Tata Silver ETF, Nippon India Silver ETF, and HDFC Silver ETF declining between 6% and 7%. This decline was mirrored in the spot prices of precious metals, with silver falling 5.9% to $78.53 per ounce.
The drop in silver prices was accompanied by losses in other precious metals, including platinum, which lost 2.4% to $2,006.03, and palladium, which was down 0.7% at $1,426.86. The most active July silver contract on the MCX was down 5.4% at Rs 2,75,100 per kilogram, while the same-month contract on the COMEX was down 7.6% at $78.81 per ounce.
In contrast to the decline in silver prices, gold slipped to a one-week low on Friday, largely due to elevated oil prices stoking inflation fears. Spot gold extended losses for a fourth consecutive session, and was down 1.5% at $4,579.19 per ounce by 0631 GMT, its lowest point since May 6. Bullion has lost nearly 3% so far this week.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
| May 15 Loss | Weekly Loss | |
|---|---|---|
| Spot Silver | 5.9% | 7% |
| Spot Gold | 1.5% | 3% |
| US Gold Futures | 2.2% | - |
The decline in gold and silver prices was attributed to the strengthening of the US dollar, which rose 0.3%, and the increase in US Treasury yields. Two-year Treasury yields climbed to the highest level in 14 months, while the greenback rose, putting pressure on gold and silver that pay no interest and are priced in the dollars.
US wholesale inflation accelerated to the fastest pace since 2022 in April, while the consumer price index rose the most since 2023. The dollar strengthened and 10-year Treasury yields jumped, negatively impacting gold prices.
Silver's recent run was aided by renewed speculative interest in industrial metals such as copper. The gold-silver ratio has fallen recently, which some traders view as a sign the white metal has become relatively cheap. However, the Strait of Hormuz, the vital waterway for energy flows, remains effectively closed with efforts to end the Iran war in limbo, prolonging the energy crisis and keeping inflation concerns high. Oil headed for a weekly gain, with West Texas Intermediate edging toward $103 a barrel on Friday.
Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline
Investor Takeaway
Investors should be cautious of the decline in silver ETFs and precious metal prices due to rising interest rate expectations.
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