Silver Prices Retreat as Profit-Taking and a Strong Dollar Weigh

Silver prices dropped sharply last week due to profit-taking and a strong US dollar. Focus now shifts to central bank meetings for future direction, despite lingering geopolitical risks.

Silver faced notable downward pressure last week, with prices declining across major trading hubs. The precious metal fell approximately 3.5% on the COMEX exchange, while a similar drop of 3.3% was recorded on India's MCX futures market.

Market experts point to a combination of profit-taking and margin calls as primary drivers behind the sell-off. According to analyst Pranav Mer of JM Financial, these technical factors have been a significant headwind. Furthermore, a robust US dollar has continued to undermine the appeal of non-yielding assets like silver. This dynamic persists despite ongoing geopolitical tensions, which would typically bolster safe-haven demand for the metal.

Monetary Policy Takes Center Stage

Investor attention is now firmly fixed on a packed schedule of central bank meetings this week. The US Federal Reserve convenes on Tuesday, followed by the European Central Bank and the Bank of England on Wednesday, and the People's Bank of China on Thursday. Market expectations for immediate interest rate cuts remain subdued. Supporting this view, the latest US core consumer price index held at an annual rate of 2.5% in February—a level still considered too elevated to justify monetary policy easing. This environment of sustained higher rates increases the opportunity cost of holding silver, which offers no interest.

Geopolitical Support Remains in Play

While not enough to counter last week's selling pressure, the demand for portfolio protection has not vanished entirely. Ongoing tensions involving Iran and the Strait of Hormuz continue to embed a risk premium within commodity markets. Vijay Kuppa of InCred Money highlights silver's historically low correlation with equity markets, arguing this characteristic maintains the metal's relevance for long-term portfolio diversification strategies.

In the immediate term, however, the forward guidance issued by the world's major central banks is likely to set the directional tone. Should the dollar retain its strength and the pause in interest rate cuts be confirmed, silver is expected to remain under pressure in the near future.