Silver Rally Fails, Dollar and Fed Hawkishness Weigh

Silver (XAG/USD) weakened on Thursday (May 14), with the spot price hovering around US$84.86 per ounce, down around 3.1% from its previous close.

This correction followed a rally in silver over the past few sessions, triggering profit-taking as the market assessed that previous gains were relatively "full" in the short term. Sentiment also became more cautious as investors refocused on the direction of US interest rates.

From a macro perspective, a strengthening dollar and rising US yields again posed a drag on the yieldless metal. The dollar index (DXY) hovered around 98.6, while the 10-year US Treasury yield hovered around 4.45%, underscoring tight financial conditions.

Comments from central bank officials also maintained a hawkish bias

Comments from central bank officials also maintained a hawkish bias. Kansas City Federal Reserve President Jeffrey Schmid said inflation remained the most pressing risk, and noted that high oil prices continued to erode household purchasing power and increase business costs.

Going forward, market participants will monitor whether yields and the dollar remain at high levels, as well as developments in energy prices and geopolitics that could impact the inflation trajectory. This combination of variables remains a key determinant of whether silver continues its correction or stabilizes after a period of profit-taking. (Arl)

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