Silver prices extended their decline for a second straight session on Thursday, with the metal trading near $57.00 per troy ounce, as a hawkish Federal Reserve stance and rising crude oil prices overshadowed softer-than-expected US inflation figures. The XAG/USD pair remained under pressure despite data showing both consumer and producer price growth cooling in June.
US CPI eased to 3.5% year-on-year in June from 4.2% in May, below the 3.8% forecast. Similarly, PPI annual growth slowed to 5.5% from 6.0%, with a monthly contraction of 0.3%. These numbers initially buoyed hopes that the Fed might pivot toward a less restrictive policy. However, Fed officials quickly signaled that interest rates would stay elevated for an extended period, reiterating their commitment to curbing inflation. This hawkish rhetoric increased the opportunity cost of holding non-yielding assets like silver, driving prices lower.
Adding to the precious metal's woes, renewed geopolitical tensions between the United States and Iran pushed oil prices higher, with Brent crude staying above $85 per barrel. The rally in energy costs renewed fears that inflation could remain sticky, further reinforcing expectations that the central bank would keep rates high. Higher interest rates and a stronger US dollar—a typical byproduct of tighter monetary policy—make dollar-denominated silver more expensive for foreign buyers and reduce its appeal as an investment.
The broader precious metals complex also felt the pinch. Gold slipped toward $4,035 an ounce in Asian trading, even as safe-haven demand emerged from geopolitical risks. Platinum and palladium faced similar headwinds amid concerns about industrial demand. Market participants have now lowered the probability of a September rate hike to about 44%, down from 50% a day earlier, but remain cautious given the ongoing uncertainty.
Silver's decline underscores the market's focus on the Federal Reserve's sustained hawkish posture. Until there is clearer evidence that inflation is durably moving toward the 2% target, precious metals are likely to remain under pressure. Investors will closely monitor upcoming Fed meetings and key economic data for signs of a potential policy shift.
