Silver tumbles to two-year lows.. why?

Silver prices declined to two-year lows on Friday away from the psychological level of $20 an ounce.

The losses were led by the dollar, the global central banks, and Chinese economy. 

Silver Prices

Silver prices declined to $19.37 an ounce as of July 1, the lowest since July 2020.

Silver lost over 18% in the second quarter of the year, the first quarterly loss in three quarters, and the largest since the first quarter of 2020.

The Dollar

The dollar index surged to two-week highs at 105.64, the highest in 20 years at 105.79.

Higher US dollar is pressuring mineral and commodity prices considerably as they become costlier to holders of other currencies. 

Global Central Banks 

Global Central Banks are still moving to control runaway inflation and tightening monetary policies in response. 

The Fed took a historic decision last month to hike rates by 0.75% to 1.75%, the highest hike since 1994.

Bank of England hiked rates by 25 basis points to 1.25%, the fifth such increase in a row.

Swiss Central Bank decided to hike rates by 50 basis points at the June 16 meeting to minus 0.25%, the first such increase since 2007, while analysts expected no change at minus 0.75%.

Higher interest rates weaken demand on gold prices as it becomes less attractive as an investment.

China's Economy 

As weak data from China continues to mount and point to a slowdown in economic growth, demand is expected to slow as well on the white metal.

Estimates 

Silver prices are expected to decline to $18 and maybe less after giving up $20 already as the dollar strengthens.