Silver Extends Downturn

Silver rose to around $65 an ounce on Friday but declined more than 1% on the week, as investors digested the latest US inflation data ahead of next week’s Federal Reserve meeting. US inflation held at 3.4% in August, in line with expectations, while monthly CPI rose 0.4%, the strongest increase in three months. Core CPI accelerated to 0.3% month-on-month, its largest gain since April and above expectations of 0.2%, although the annual rate eased to 2.4%, its lowest since March 2021. US producer prices also accelerated in August as the Iran war pushed wholesale energy costs higher, while last week’s labor market data pointed to continued employment resilience. Markets have increased bets on a 25-basis-point Fed hike next week, with the CME FedWatch Tool now pricing in around an 86% probability, up from roughly 70% before the inflation data.

Silver traded around $63.5 an ounce on Friday after tumbling over 5% in the previous session, as investors braced for the US consumer price index report that could reinforce expectations for a Federal Reserve rate hike next week. Data released Thursday showed US producer prices accelerated in August as the Iran war pushed wholesale energy costs higher. Markets are now pricing in roughly a 71% probability of a 25-basis-point Fed rate increase next week, up from 61% before the PPI data. Silver also faced pressure from surging oil prices amid the escalating US-Iran conflict, fueling concerns over rising inflation. Meanwhile, Treasury yields jumped following lower-than-expected purchases by the US Treasury Department during its first expanded buyback operation. Non-interest-bearing assets such as silver tend to underperform when yields rise. Silver is on track to lose about 4% this week, marking its third straight weekly decline.

Silver tumbled around 4% to $64.5 an ounce on Thursday as traders increased their bets on a Federal Reserve rate hike next week following stronger-than-expected US producer price data. US PPI rose 0.4% in August, while annual producer inflation accelerated to 5.4%, surpassing market expectations of 5.3%, driven by a sharp rise in energy prices, alongside evidence of stronger cost pass-through across other sectors. The data came as oil prices rallied again amid escalating US-Iran strikes in the Middle East, reinforcing expectations for tighter monetary policy and prompting markets to price in a more than 70% chance of a Federal Reserve rate hike on September 16. Meanwhile, traders also increased their bets on further European Central Bank tightening after the central bank raised borrowing costs as expected and warned that inflation risks remained tilted to the upside.