Silver falls 5.8% to $49.15 as Fed decision and December risks weigh

Spot silver dropped sharply to $49.15, losing 5.8% on the day, according to Investing.com. The precious metal experienced an 8.9% decline over the week and has fallen 18.7% since the start of October. This rapid sell-off followed the Federal Reserve’s latest policy meeting, which left markets uncertain about the direction of US interest rates ahead of December.

Fed’s October Policy Move and Ongoing Rate Risks

On October 28, the Federal Reserve kept its benchmark rate unchanged at 3.75% to 4.00%, despite speculation about a possible increase. The committee voted 10-2 in favor of holding rates steady, with two policymakers advocating for a quarter-point hike.

Fed officials pointed to “resilient economic activity” and rising inflation pressures, suggesting that the debate over further monetary tightening is not settled. The Fed’s statement emphasized continued monitoring of inflation and growth, keeping the possibility of future rate hikes open if price pressures remain elevated or economic expansion accelerates.

Higher interest rates tend to boost the opportunity cost of holding non-yielding assets like silver and can also cool industrial demand by slowing economic activity. As a result, investors are watching key indicators such as inflation and employment ahead of the next Federal Open Market Committee (FOMC) meeting on December 8-9, which could determine the metal’s direction into year-end.

Officials indicated that if economic growth stays robust and inflation persists, interest rates may remain high and continue to pressure precious metals like silver.

A rate hike in December would likely drag prices down further, while a pause combined with slowing inflation could support a recovery in silver.

Mini dictionary: Federal Reserve (Fed), the central bank of the United States, sets national monetary policy, including interest rates, and its decisions influence global financial markets.

Technical Signals Confirm Downtrend

Technical charts show silver extending its losses from above $53 to just above $49. The metal traded around $48.90 before closing at $49.15, according to Investing.com. Over the past month, silver is down 18.7%, and in the last six months, it has declined by 33.4%.

The latest session left silver trading below key moving averages at $59.74 and $62.58. Both averages remain in a downward trend, reinforcing bearish sentiment in the market. According to TradingView, the relative strength index (RSI) plummeted to 23.7, well beneath its signal average of 34.34. Readings below 30 are widely viewed as oversold, though they do not always trigger an immediate rebound during extended declines.

The immediate downside target has shifted to the intraday low of $48.86. Breaking below this threshold may open the way for further losses, while a recovery above $50 would be an early sign of stabilization. Analysts point to $59.74 as a stronger indicator of a more substantial rebound if reached in the coming weeks.

After tumbling below major support, silver continues to face intense selling pressure, with little technical evidence yet for a swift reversal.

Political and Industrial Factors Shape December Outlook

The US midterm elections, set for November 3, introduce additional uncertainty for silver markets. Potential changes in Congress could affect fiscal policy negotiations and influence moves in the dollar and Treasury yields, both of which are instrumental for silver.

As silver is widely used in manufacturing, persistent weakness in industrial demand could add to pressures on the metal if economic sentiment deteriorates. However, if inflation slows and the Fed signals a pause in rate hikes, silver could find support near $55 and possibly attempt a move toward $60 in December. Sustained tightening and stubborn inflation, by contrast, present further downside risks, possibly pushing prices even lower.

Analysts caution there is no guarantee on which scenario will play out. Silver’s direction over the coming weeks is likely to hinge on developments in the dollar, real yields, industrial trends, and the outcome of the December Fed meeting.