Silver Crashes 6.5% to $70 as Fed Hawks Crush Safe-Haven Bid

During Thursdays session silver price or XAG/USD dropped sharply by more than 6.5% to around $70.

This is an one-day fall for a metal like silver that usually gets support from the current unstable global situation.

The reason is not what we thought it would be.

The Federal Reserve and its policy update, from Wednesdays meeting are being blamed for this drop.

The update hit silver prices harder than most traders had expected.

What the Fed Said — and Why Silver Heard It Loudest

The Federal Reserve did what we thought they would do. They kept interest rates the same for the meeting in a row. On Wednesday Chair Jerome Powell talked to the press. Said that if inflation does not get better they will not lower interest rates. 

He made it clear that the Federal Reserve will not make any changes to policy unless inflation gets a lot closer to the goal of 2 percent. The markets did not need to hear anything

By Thursday people were guessing what the Federal Reserve will do next. The CME FedWatch Tool said that there is a 57.5 percent chance that the Federal Reserve will either keep interest rates the same or raise them in December.

If interest rates stay high for a time it is bad for silver because silver does not earn any interest. Most people think that interest rates will not go down so it is hard to see why anyone would want to own silver. When you can get paid for putting your money in cash or short-term bonds it is harder to justify owning silver. On Thursday the price of silver went down.

That shows that big investors are thinking about this and making changes. The Federal Reserve and their decisions on interest rates are still very important. Silver is still affected by what the Federal Reserve does, with interest rates.

Why the Middle East Isn't Riding to Silver's Rescue

This part is different from what people do. Along with gold silver is seen as a place to put money. People think that the demand for silver should go up when there is a war problems with getting energy and stress between countries.

The Strait of Hormuz is basically closed. The problem between the U.S., Israel and Iran has caused issues with the worlds oil supply. The chance of things getting worse is going up every day.

Silver prices have gone down by about 6.5% in just one day.

When it comes to trades the answer is simple: what people think about interest rates is more important than what they think about politics. Even assets that are normally safe havens have a time keeping people interested when the market starts talking about "higher interest rates for a longer time."

Also silver is used more in factories and electronics than gold so it is affected more when the economy is slow. This means silver is in trouble when the Federal Reserve says the economy will not do well in the future.

Something else happened on Thursday that changed things. President Trump said Israel would not keep attacking the energy site but he also said he would destroy Irans South Pars gasfield if Iran attacked Qatar again. This made people a little less worried. It was enough to make them less interested in safe havens, like silver.

Key Levels and What Comes Next

The price of something is currently, at seventy dollars. This is a deal because people tend to pay attention to round numbers. If the price goes below seventy dollars and stays there it could lead to a change. On the hand if the price goes back up it needs to get to around seventy three to seventy four dollars to make up for what happened on Thursday.

There is still a lot of pressure to push the price down. The big picture is not looking good for Silver now. Things will not get better until the Federal Reserve says something to make people think they will not raise interest rates much or until something big happens in the world that makes people worried. There are two things that could change things before week: what the inflation report says on Friday and what happens with Hormuz. Silver is the thing that faces a time right now.