Silver prices crashed in Thursday’s trade, October 22, with the December delivery contract on MCX plunging ₹8,593 per kilogram to ₹2,00,575. This was the lowest level in seven months, as escalating tensions in the Middle East pushed oil prices higher, fueling expectations of further US Federal Reserve rate hikes.
Gold prices also fell, with MCX gold declining ₹2,300 per 10 grams to ₹1,43,600, its lowest level in two months. Both gold and silver are down 3.3% and 10%, respectively, so far this month.
The crash in precious metals coincided with a rise in crude oil prices, as deadly attacks in Saudi Arabia heightened concerns over the impact on energy flows from the region.
Reports indicate that the US and Israeli militaries have developed plans for a short, intensive operation following next month’s midterm elections.
Brent crude rose 3.3% to $112.38 a barrel after touching its highest level in five months. It is at the upper end of the $97–$112 range in which it has fluctuated through October, amid uncertainty over when the war with Iran will allow the global energy industry to return to normal.
Goldman Sachs recently raised its Brent crude price forecast for December to $90 a barrel from $85, citing a risk premium of just over $20 a barrel.
Last month, US President Donald Trump played down concerns about oil prices and the war, saying the conflict would end after the midterm elections, although hostilities have shown little sign of easing.
Amid rising supply shortages, Trump earlier this month waived sanctions and tariffs on Russia, but persistent tensions in the region are keeping prices elevated.
Higher oil prices fuel expectations of Fed rate hikes
Traders trying to anticipate the Fed’s next move have had few fresh clues since Chair Kevin Warsh’s remarks on Friday, which did little to dispel expectations that the central bank will hold rates steady at its meeting next week.
Traders are largely expecting an additional rate hike at the December meeting. Inflation remains well above the central bank’s 2% target, and elevated energy costs increase the likelihood that it will need to tighten monetary policy further to contain price pressures.
Additionally, last week’s US consumer and producer inflation data came in hotter than expected, strengthening the case for tighter monetary policy, even though Fed officials are still expected to hold off when they meet on October 27–28.
Traders are pricing in an 86% likelihood of a rate increase in December, according to CME’s FedWatch Tool. US Personal Consumption Expenditures (PCE) data, due on October 29, could also offer fresh clues about the path of interest rates.
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