Silver drops to $64.35 on strong US inflation data
Silver prices fell 4.39% to $64.35 as US producer inflation rose to 5.4% annually, increasing bets on Federal Reserve rate hikes.
Silver (XAG/USD) traded at $64.35 per ounce on Thursday. The metal declined 4.39% during the session. This drop followed the release of US Producer Price Index data. The figures reinforced expectations for tighter monetary policy from the Federal Reserve. Traders reacted to rising US Treasury yields and a firmer US Dollar.
Inflation data drives market reaction
US producer prices rose 0.4% month-over-month in August. This matched market expectations and accelerated from the 0.1% gain in July. Annual producer inflation climbed to 5.4%, slightly above the 5.3% forecast. The core measure, excluding food and energy, increased 0.2% on a monthly basis. This was below the expected 0.3% but higher than the previous month's figure.
Markets now price in a 70% chance of a rate hike at the next Fed meeting. This probability rose from 61% before the data release. Rising oil prices due to Middle East tensions also contributed to inflation concerns. The CME FedWatch tool reflects these shifting expectations among traders.
Dollar strength pressures silver prices
The US Dollar Index traded higher at 98.90 on Thursday. A stronger currency makes silver more expensive for holders of other currencies. This dynamic adds pressure to the metal's price. Silver offers no yield, reducing its appeal when interest rates rise.
The 10-year US Treasury yield reached 4.92%. This is the highest level since November 2023. The yield rose after the US Treasury's bond buyback plan failed to calm markets. Higher bond yields typically weigh on precious metals like silver.
Investors await Friday CPI release
Market attention turns to the US Consumer Price Index due Friday. Another upside surprise could reinforce rate hike expectations. This would keep silver under pressure. Conversely, softer figures could ease concerns about further monetary tightening. This might offer relief to the white metal.
Silver is used in electronics and solar energy for its conductivity. It is also a store of value and portfolio diversifier. According to GN auto markets/commodities: silver prices, industrial demand and monetary policy remain key drivers. Investors monitor these factors alongside gold price movements.
