Silver Surges as US Inflation Cools, Fed Rate Hike Bets Ease

Silver rose nearly 2% to $58.9 an ounce on Tuesday after weaker-than-expected US inflation data dampened expectations for Federal Reserve rate hikes. The headline CPI fell to 3.5% in June, driven by slowing energy inflation, while the core rate unexpectedly eased to 2.6%, both below forecasts. Month-over-month, the CPI dropped 0.4%, its first decline since 2020. Still, annual rates remain well above the Fed’s target. Investors now await Federal Reserve Chair Kevin Warsh’s first congressional testimony for signals on a potential September hike. Money markets still price in an over 50% chance of a quarter-end rate increase, particularly amid renewed US-Iran tensions. President Donald Trump announced plans to reinstate a blockade on Iranian vessels in the Strait of Hormuz and sought compensation from nations benefiting from US security efforts in the region.

Silver rose above $58 an ounce on Tuesday but held most of the losses from the previous session, as President Donald Trump announced plans to reinstate a blockade on Iranian vessels transiting the Strait of Hormuz and sought reimbursement from countries benefiting from US efforts to secure the vital shipping lane. The move drove oil prices sharply higher, reviving concerns over inflation and the interest rate outlook. The measures followed renewed hostilities between Washington and Tehran, with the US targeting Iran’s ability to disrupt maritime shipping while Tehran retaliated against US allies in the region. Investors also awaited key US inflation data and Federal Reserve Chair Kevin Warsh’s testimony before the US Congress later today, with markets closely parsing his remarks for further policy guidance. Markets now price in roughly a 51% chance of a Fed rate hike in September, compared with a 23% probability that the central bank will leave rates unchanged.

Silver declined more than 3% to $58 per ounce on Monday, extending losses for a second straight day, as rising Middle East tensions amplified inflation worries, strengthening the view that US interest rates will stay higher for longer. US and Iranian forces exchanged heavy missile and drone strikes over the weekend and into Monday. Tehran reported attacks on US military sites across the Gulf and kept the Strait of Hormuz closed, driving oil prices up over 4%. Investors responded by increasing bets on a Federal Reserve rate hike, with markets now pricing in a nearly 70% chance of a September increase. Fed Chair Kevin Warsh is scheduled to testify on monetary policy before Congress on Tuesday, with markets watching closely for further signals. The US is also set to release key economic data this week, including June’s consumer price index and retail sales.