Silver Drops Over 1% as Dollar Strengthens

Silver fell more than 1% to below $62 an ounce on Monday, pulling back from two-week highs amid a firmer US dollar. However, losses were contained as signs of a cooling US labor market tempered expectations for a Federal Reserve rate hike. Last week’s data showed a sharp slowdown in US job growth in June, alongside downward revisions for April and May, leading markets to scale back near-term hike bets. At the same time, oil prices edged lower as recovering energy flows through the Strait of Hormuz and the prospect of increased OPEC+ supply fueled concerns about a potential glut. Investors now await the Fed’s meeting minutes, due Wednesday, with markets pricing in over a 50% chance of a September rate increase.

Silver traded above $61 an ounce on Monday, holding onto most of last week’s gains as weaker-than-expected US jobs data and lower oil prices led traders to scale back expectations for Federal Reserve interest rate hikes. Oil prices edged lower as recovering energy flows through the Strait of Hormuz and the prospect of increased OPEC+ supply fueled concerns about a potential glut. That has helped ease inflationary pressures that had previously heightened fears of further rate hikes and weighed on non-yielding precious metals. Meanwhile, data released last week showed US nonfarm payrolls increased by just 57,000 in June, the smallest gain in four months and well below forecasts of 110,000, prompting traders to reduce their bets on a September rate hike. According to the CME FedWatch tool, the probability of a hike fell to 50%, down from 66% before the report.

Silver rose above $62 per ounce on Friday, reaching its highest level since June 23 and heading for a nearly 6% weekly gain, as weaker-than-expected US jobs data dampened expectations for a near-term Federal Reserve interest rate hike. US nonfarm payrolls grew by only 57,000 in June, the smallest increase in four months and well below the 110,000 forecast, leading traders to cut their bets on a September hike. The CME FedWatch tool showed the probability of a rate increase falling to 50%, down from 66% before the data. Lower interest rates reduce the opportunity cost of holding non-yielding assets like silver. The US dollar also weakened, heading for its biggest weekly drop since April, which further boosted precious metals. Fed Chair Kevin Warsh also said this week that inflation expectations are moderating while reaffirming the central bank’s commitment to maintaining price stability.