Silver Drops 1.47% as Oil Surges Past $100
Spot silver fell to $63.55 on Monday. The decline follows a sharp rise in crude oil prices. Higher energy costs have strengthened the case for Federal Reserve rate hikes. This shift has removed support from the precious metal market.
Spot silver (XAGUSD) traded at $63.55 at 07:30 GMT. The metal is down $0.95, or 1.47%, from the previous close. The session high reached $64.48, while the low touched $63.52. Buyers have remained absent during this price drop.
The decline correlates with a strong move in crude oil markets. WTI crude rose more than 3% early Monday. Brent crude posted a similar gain. These moves follow weekend attacks on Saudi infrastructure and shipping near the Strait of Hormuz.
Crude Oil Surge Increases Rate Hike Odds
The Saudi East-West pipeline remains shut after a drone strike on a pumping station. This outage threatens up to 4% of global supply. The Houthis have also tightened their position near the Bab el-Mandeb Strait. These factors are pricing in a sustained disruption to energy flows.
Higher oil prices keep inflation elevated. This strengthens the argument for the Federal Reserve to maintain a hawkish stance. The August Consumer Price Index showed a monthly rise of 0.4%. The annual rate held at 3.4%. Core inflation rose 0.3% monthly, with the annual core rate easing slightly to 2.4%.
Rate hike odds for Wednesday jumped to 87%. This is up from roughly 67% before the data release. The 10-year Treasury yield touched 4.992%. This is the highest level since October 2023. The 30-year yield held near 5.356%. These yields apply pressure to assets that do not pay interest.
Fed Decision Focuses on Inflation Trajectory
The Federal Open Market Committee begins its two-day meeting Tuesday. The decision is expected Wednesday afternoon. A quarter-point increase is nearly fully priced by the market. Goldman Sachs and J.P. Morgan both expect this move. J.P. Morgan also forecasts another quarter-point increase in December.
The market now waits for the Fed’s tone. Investors need to know if the central bank is concerned about energy prices. Silver is positioned for a scenario where the Fed remains cautious. The combination of high yields and oil above $100 limits buying interest. This analysis is based on data from GN auto markets/commodities: silver prices.
