Silver price falls toward two‑month low as rising Fed hike bets pressure XAG/USD
NEW YORK (June 10) Silver (XAG/USD) remains under pressure on Wednesday and trades around $64.70 at the time of writing, down 1.02% on the day. The white metal is attempting to stabilize after hitting a two-month low at $63.37, but the rebound remains limited as investors reassess the outlook for monetary policy in the United States (US).
The latest US inflation data showed that the Consumer Price Index (CPI) accelerated to 4.2% YoY in May, its highest level since April 2023 and in line with market expectations. Core inflation rose to 2.9% YoY, while monthly core inflation eased to 0.2%.
The resurgence in inflationary pressures comes amid a sharp rise in energy prices triggered by the escalating conflict between the US and Iran. Higher energy costs are complicating the Federal Reserve’s (Fed) efforts to bring inflation sustainably back toward its 2% target.
Before the escalation in the Middle East, markets were still pricing in several rate cuts this year. Those expectations have largely faded, with investors now considering the possibility of monetary tightening. According to the CME FedWatch Tool, the chances of a 25-basis-point rate hike later this year continue to increase.
Meanwhile, geopolitical tensions remain elevated. The US Central Command (CENTCOM) confirmed that it carried out new strikes against Iranian military facilities after the downing of a US Apache helicopter. In response, Iran launched attacks against several US bases in the region and warned that further operations could follow.
Although geopolitical uncertainty typically supports demand for precious metals, expectations of higher interest rates are exerting a stronger influence on Silver. Unlike yield-bearing assets, Silver does not generate income, making it less attractive when Bond yields and the US Dollar (USD) strengthen.
Support for the Greenback from expectations of a more restrictive monetary policy, therefore, remains an additional headwind for Silver, which stays vulnerable as long as markets continue to price in a higher-for-longer interest rate environment in the United States.
FXStreet
