Silver futures witnessed a steep decline on Thursday, falling by more than 3 percent in domestic commodity markets as investors reacted to signals from the US Federal Reserve that interest rates could remain higher for longer.
On the Multi Commodity Exchange (MCX), silver contracts for July delivery plunged by Rs 8,817, or 3.5 percent, to Rs 2,42,990 per kilogram. Trading activity remained strong, with a turnover of 11,188 lots during the session.
Fed Policy Signals Trigger Selling
The sharp fall came after the US Federal Reserve kept its benchmark interest rate unchanged in the 3.5 percent-3.75 percent range.
However, the central bank indicated that inflation remains a concern and suggested that further rate hikes may still be possible later this year.
According to market participants, these comments reduced expectations of an early interest rate cut and triggered selling in precious metals.
Stronger Dollar Adds Pressure
Analysts said a stronger US dollar also weighed heavily on silver prices.
When the dollar strengthens, commodities such as silver and gold become more expensive for buyers using other currencies. This often reduces demand and puts pressure on prices.
Gaurav Garg, Research Analyst at Lemonn Markets Desk, said silver prices in domestic markets fell sharply after traders reacted to the Federal Reserve’s relatively hawkish stance.
He noted that investors remained cautious following the latest policy decision and reassessed their expectations for future monetary easing.
Global Silver Prices Also Decline
Weakness was also visible in international markets.
Comex silver futures for July delivery dropped USD 2.36, or 3.34 percent, to USD 68.40 per ounce in New York.
Pinky Yadav, Commodity Fundamental Analyst at Choice Broking, said silver remained under pressure globally as the Federal Reserve continued to focus on controlling inflation despite signs of slower economic growth.
Higher Rates Could Keep Bullion Under Pressure
Analysts believe precious metals may remain volatile in the near term.
Rajesh Palviya, Head of Research at Axis Direct, said higher bond yields and a stronger dollar could continue to weigh on bullion prices.
He added that the Federal Reserve’s commitment to fighting inflation suggests that interest rates may stay elevated, limiting the upside for silver and other precious metals in the coming months.