Silver (XAG/USD) drops back to about $51.10 in early European trading on Wednesday, snapping a five-day run. The culprit? The US Dollar’s sudden strength. Traders are watching the Fed for hints about its next move, and several officials—John Williams, Christopher Waller, and Raphael Bostic—are lined up to speak later today. Their comments could set the tone for where interest rates go next.
The US Dollar Index has pushed up to around 99.55. Investors seem relieved by signs that the US government shutdown might soon end. When the dollar gets stronger, silver—priced in dollars—usually takes a hit because it gets pricier for everyone outside the US.
US Government Shutdown’s Positive News Supports the Greenback
There’s more. The Senate just passed a temporary funding bill to keep the government running through January 30. The House should sign off soon, then it’s off to President Trump. This move has calmed nerves, given the uncertainty hanging over markets. With the government back in action, a backlog of economic data will finally come out, likely highlighting how things have cooled off lately.
Rate Cut Expectations Might Limit Silver’s Downside
Even with this dip, silver’s not out for the count. More traders now expect the Fed to cut rates in December. The CME FedWatch Tool shows a 68% chance of a 25-point cut. Lower rates make holding silver—an asset that doesn’t pay interest—more attractive. So, while silver’s under pressure now, those rate cut bets could keep a floor under prices in the days ahead.
