Silver Tumbles on Warsh's Hawkish Warning: Short-Term Pain, Long-Term Gain

Silver's recent decline to $64.66 per ounce on Tuesday was largely driven by escalating conflict in the Middle East and rising inflation anxieties, which have made tighter monetary policy more likely according to Federal Reserve Chair Kevin Warsh.

The market has taken note of Warsh's warning that the central bank still has 'work to do' to reach its 2 percent target, with traders pricing in a roughly 70 percent chance of a rate increase this month. This shift in expectations is weighing on silver prices.

However, despite the recent slide, the metal remains in a longer-term uptrend, standing about 55 percent above its level from a year ago. The current pullback looks more like a correction within that trend than a fundamental reversal.

The underlying narrative of the silver market has shifted little, with consumption outpacing production by a widening margin for six consecutive years. The global supply gap is projected to widen to 46.3 million ounces this year due to constrained mine output and limited recycling volumes.