Silver Falls to $63.50 as Fed Hike Odds Hit 87%

Silver prices fell to 63.50 USD per troy ounce. The decline reversed gains from the previous session. Trading activity in Asian markets reflected this drop. The metal is under pressure from rising interest rates. Hotter US inflation data changed market expectations. Investors now anticipate tighter monetary policy. This shift hurts non-yielding assets like silver.

US Consumer Price Index data for August showed a 0.4 percent monthly increase. Annual inflation reached 3.4 percent. Core CPI rose 0.3 percent for the month. This figure beat forecasts of 0.2 percent. The data prompted a sharp rise in rate hike probabilities. The CME FedWatch tool shows an 87 percent chance of a September hike. This is up from 59 percent the previous week.

Inflation Data Drives Rate Expectations

The Bureau of Labor Statistics released the inflation figures. The numbers reinforced fears of persistent price pressure. Federal Reserve officials face pressure to tighten policy. A quarter-point rate hike is now the dominant market view. Higher rates increase the cost of holding silver. Investors demand higher yields from bond markets. This reduces the appeal of precious metals.

The probability of a rate hike jumped significantly. It moved from 59 percent to 87 percent in one week. This rapid repricing signals high confidence among traders. The Fed is expected to act quickly. The timing of the next meeting is critical. The market is betting on a decisive move. This environment is difficult for silver prices.

Oil Supply Disruption Adds Inflation Pressure

Crude oil prices rose to four-month highs. A drone attack forced a pipeline shutdown in Saudi Arabia. The East-West pipeline operations suspended immediately. Officials have not set a date for resumption. This event disrupted a key transport route. The route bypasses the Strait of Hormuz. The supply shock impacts global energy costs.

Rabobank analysts note the impact of the pipeline closure. They cite the seizure of Red Sea locations by Houthis. Bond yields surged late last week. This was due to rising oil and inflation concerns. Debt worries also contributed to the yield increase. Risk sentiment deteriorated as a result. These factors combine to weigh on silver.

Market Sentiment Turns Risk Averse

Asian equity indices traded in the red on Monday. US equity futures also showed negative moves. The energy shock spread to broader risk assets. Traders moved away from high-risk positions. Silver suffered from this broader market weakness. Geopolitical instability remains a key driver. The Middle East crisis continues to affect prices.

Silver remains a non-yielding asset. It competes with interest-bearing instruments. Higher rates make bonds more attractive. This dynamic suppresses demand for silver. The combination of high oil prices and high rates creates a headwind. The situation described by GN auto markets/commodities: silver prices reflects this tension. Investors monitor both inflation and geopolitical risks.