Silver loses over 3% as US Dollar rallies on Fed rate hike bets

• A decline of more than 3% leaves Silver under pressure on Thursday as US Dollar strength weighs on precious metals.
• With US inflation exceeding forecasts, expectations of Federal Reserve interest rate increases strengthen.
• Non-yielding assets face further pressure following hawkish remarks by Federal Reserve officials.

A daily fall of 3.04% leaves Silver (XAG/USD) trading at around $50.15 at the time of writing, extending Thursday’s losses. Heavy selling weighs on the white metal as a firmer US Dollar (USD) and mounting expectations of additional monetary tightening by the Federal Reserve (Fed) diminish the appeal of precious metals.

Having reached its highest level since April 2025, the US Dollar Index (DXY) is trading close to 103.10. The index tracks the Greenback against six major currencies. Dollar strength raises the cost of Silver for overseas investors, while higher interest rates make assets that offer no yield less appealing.

October’s core Consumer Price Index (CPI) increased by 0.3% MoM, against a forecast of 0.2%, while headline inflation rose 0.4%, exceeding the expected 0.3%. These latest US inflation readings bolster expectations of a more restrictive monetary policy stance.

Increasingly hawkish signals from policymakers have helped markets fully price in a December Fed rate increase, with the probability of a further rise in January now put at nearly 65%. On Thursday, Cleveland Fed President Beth Hammack argued that monetary policy needs to become restrictive and warned that higher energy costs are passing through to other prices. Fed Governor Christopher Waller had previously suggested that a 50-basis-point (bps) increase in December could be considered if core inflation came in at 0.3% or above. The latest figures met that threshold.

Falling US equities could place Silver under additional selling pressure if investors close positions to offset losses elsewhere. Attention now turns to Friday’s US Producer Price Index (PPI) release and further remarks from the Fed for more guidance on the outlook for interest rates.