Silver (XAG/USD) is holding onto gains after a previous session of losses, trading around $33.80 per troy ounce during Thursday’s Asian session. However, the non-yielding metal remains under pressure following the Federal Reserve’s (Fed) latest interest rate decision.
As expected, the Fed kept the federal funds rate steady at 4.25%–4.5% during its March meeting while reaffirming its outlook for two rate cuts later this year. The central bank’s stance reflects concerns over slowing GDP growth and rising unemployment, counterbalancing persistent inflationary pressures, which may be exacerbated by aggressive tariffs imposed by President Donald Trump.
Market Dynamics: Yield Decline and Liquidity Risks
Silver prices found support as U.S. Treasury yields retreated, with the 2-year yield falling to 3.97% and the 10-year yield easing to 4.24%. Bonds also gained traction after the Fed announced plans to slow the pace of quantitative tightening, citing liquidity concerns and risks related to government debt limits.
A surge in silver lease rates has emerged as stockpiles shrink, particularly in London, where supplies are shifting toward the U.S. to capitalize on higher prices. Banks and traders typically lease silver to maintain short-term liquidity for trading and operational needs, but dwindling reserves have tightened the market.
This supply shift has widened price gaps across major trading hubs, with spot silver gaining 17% year-to-date, outpacing other commodities. Additionally, physical silver transfers from Canada and Mexico are under strain due to tariffs, further restricting availability. Growing concerns of a potential “silver squeeze” could disrupt trade for months, adding further volatility to the market.
