Silver Prices Stuck Ahead of Expected Rate Hike

Silver prices hovered around $63 per troy ounce as traders awaited the Federal Reserve's decision on interest rates. The Fed has not raised rates since July 2023, and investors are bracing for a possible hike of 25 basis points.

The market is caught between hawkish policy and physical demand, with buyers holding back ahead of the rate announcement. Precious metals tend to lose their appeal when fixed-income alternatives offer real returns, which is currently the case.

A Reuters survey found that 86 out of 101 economists expect a 25-basis-point increase in rates, which would lift the target range from 3.50%-3.75% to 3.75%-4.00%. Inflation remains above the Fed's 2% objective, with U.S. inflation running at 3.4% in August.

Industry demand for silver is holding steady, driven by photovoltaic buildouts and electronics components. However, market mechanics suggest a cautious story, with trend-following funds trimming their futures positioning to a modest net-long.