Prices fall after meeting
Silver prices saw a steep fall after the FOMC’s (Federal Open Market Committee) policy setting meeting. The hawkish stance of the meeting, clearly directed towards a December rate hike, likely set the prices for precious metals rolling. After the media release on Wednesday, precious metals fell on trading hours during Thursday. Gold, silver, platinum, and palladium fell 2.5%, 4.6%, 1.9%, and 2.2%, respectively. The five-day trailing returns also remained in the red territory.
More on silver prices
Rising interest rates could make precious metals lose their luster. Precious metals don’t bear interest, whereas Treasuries do. If the interest rates are lifted above the zero level, the prices of precious metals are expected to fall.
Above you can see a candlestick chart for the three-month silver prices where silver has seen following a trading range of $15.25 to $16.25 per troy ounce.
While most investors and traders priced a low chance of a rate hike in the September and October meetings, the December meeting seems to be much more threatening. By taking a perspective from the weakness in global markets, the rate hike seemed off the cards. However, with an unexpected hawkish offensive statement by the Fed, the rate hike seems likely before the year ends. As easing sentiment prevailed in Japan and Europe, a monetary tightening in the United States seems an unusual move. In case the Fed stands true on driving the rates above zero, silver the gold price could see a severe downfall.
With falling precious metal prices, the ETFs that take their prices from precious metals like the iShares Gold Trust ETF (IAU) and the VanEck Vectors Gold Miners ETF (GDX) would also witness a fall. Mining companies like Silver Wheaton (SLW), Agnico Eagle Mines (AEM), and Primero Mining (PPP) could also fall. These three companies together contribute 10.4% of the GDX ETF.