Silver closes at $49.3 after falling below $50 as markets await Fed decision
Key Facts
Silver closed at $49.3 on October 30, down from $52.38 in the previous session, according to EL7 data. The close was below $50, while the spot bid stood at $49.51 an ounce at 11 a.m. New York time, down $2.53 on the day, according to Kitco data. The daily trading range was $48.94 to $53.13 an ounce. These readings place EL7’s close and the spot bid at the time of observation in different contexts within the session. Trading Economics estimated that silver was on track to fall about 15% in October, with a second consecutive monthly loss possible.
The metal’s decline coincided with U.S. inflation remaining above the level sought by the Federal Reserve. The personal consumption expenditures price index rose 0.5% in September from the previous month and 3.6% year over year. Excluding food and energy, the index rose 0.3% month over month and 3.1% year over year, according to the U.S. Bureau of Economic Analysis. The index is one of the inflation measures monitored by monetary policymakers, and its readings mean debate continues over the timing of a rate change. Markets are watching whether price pressures will keep monetary tightening on the table.
At its meeting on October 28, the Federal Reserve kept its target rate range at 3.75% to 4%, but the decision was not unanimous among committee members. Two of the 12 members voted against holding the range, preferring to raise it by a quarter of a percentage point. The committee statement said, "Inflation remains elevated." The split vote points to disagreement within the committee over the appropriate next step amid continued price increases. For silver, which yields no income, the rate path remains a factor in comparisons with assets that benefit from higher yields.
Federal Reserve Chairman Kevin Warsh linked inflation risks to energy price movements, saying, "Energy prices and related prices have risen again in recent weeks." He added that the bank’s task is to "ensure that relative price changes in some sectors do not spread to a broader range of the economy." The remarks place rising energy prices among the factors the bank is monitoring as it assesses how widely price pressures are spreading. This comes alongside September data showing annual increases in both the headline and core personal consumption expenditures indexes. These indicators form the backdrop to the committee’s next rate decision.
Attention now turns to the Federal Open Market Committee meeting scheduled for December 8 and 9. The Associated Press reported that most economists still expect a quarter-point rate increase at that meeting. The agency also noted that investors see the probability of an increase at about 85%. This reflects the fact that tightening remains an option after October’s decision, despite the committee keeping the range unchanged at that meeting. The next personal income and outlays report, which includes the October personal consumption expenditures price index, is scheduled for November 25.