Silver prices have slipped below the key $50-per-ounce level, hitting an 11-month low. The decline follows global market concerns over potential US interest rate hikes. In India, spot silver prices dropped 5.7% in a single session, impacting commodity futures and silver-linked exchange-traded funds.
Silver prices faced a sharp decline on October 30, falling below the $50-per-ounce mark for the first time in 11 months. The precious metal, which often serves as a store of value, has seen a rapid sell-off as global investors react to a changing economic environment in the United States. Silver prices are now hovering near $49.68 per ounce, breaking a support level that many traders considered crucial.
Impact on Indian Markets
The price movement in global markets was quickly reflected in India. Domestic spot silver prices fell by 5.70% to settle at Rs 1,82,442 per kilogram. This marks a significant single-day drop of over Rs 11,000 for local buyers. The sell-off also reached the Multi Commodity Exchange, where December silver futures dropped 4.52% to land at Rs 1,80,885 per kilogram. This volatility has also impacted the performance of various silver-focused investment products. Several silver exchange-traded funds, including those managed by Zerodha, DSP, and HDFC, have faced a tough period over the last six months, with some reporting losses exceeding 18%.
Why Prices Are Changing
The primary driver behind this correction is the expectation of higher interest rates in the US. When the Federal Reserve signals that it may keep interest rates high or increase them, yields on US government bonds typically rise. Because assets like silver and gold do not pay interest, they become less attractive to investors compared to bonds when rates are high. Strong US economic data has fueled this sentiment, causing investors to shift capital away from precious metals and into interest-bearing assets.
Industrial and Economic Risks
Unlike gold, which is primarily held as an investment, silver has high usage in industrial manufacturing. This dual nature creates a unique risk for investors. When the global economy faces uncertainty or potential slowdowns, demand for silver in industrial applications—such as electronics and solar panels—can weaken. This adds a layer of pressure that pure investment metals do not face. Investors are now watching these industrial demand trends closely alongside broader macroeconomic factors.
What Investors Should Monitor Next
Moving forward, the direction of silver prices will likely depend on upcoming economic data. Investors are expected to track US labor market reports, specifically non-farm payroll figures, as these help the Federal Reserve decide its interest rate path. Additionally, ongoing geopolitical tensions and the outcome of political events in the US could create further price swings. For those tracking the metal, the focus remains on whether prices can stabilize above current levels or if the decline will continue to test lower support zones.