Silver Gains as Dollar Weakens Ahead of Key US Inflation Data

Silver edged up to $66 an ounce on Wednesday, supported by a weaker US dollar as investors weighed renewed inflation risks from escalating Middle East tensions and awaited key US inflation data for clues on the Federal Reserve’s policy outlook. The dollar fell to a four-month low, with investors focused on producer-price data due Thursday and the consumer price index on Friday. The releases are expected to provide the final major clues ahead of the Fed’s September 16 policy meeting. Meanwhile, oil prices surged to their highest level in more than three months as US-Iran tensions intensified. Iran’s Revolutionary Guard said it had fired ballistic missiles at a US military-linked base in Jordan and attacked 10 ships on Wednesday, after Washington said it had destroyed five Iranian oil tankers. Markets are now pricing in around a 60% chance of a Fed rate hike at next week’s meeting.

Silver climbed toward $67 an ounce on Wednesday, recouping losses from the previous session as the weakening dollar made the greenback-priced metal more affordable for buyers using other currencies. The dollar’s weakness was largely driven by the Japanese yen’s sharp appreciation this month, along with cautious investor positioning ahead of several major central bank decisions. The US Federal Reserve, European Central Bank and Bank of Japan are all expected to raise interest rates this month. Investors are also awaiting key US inflation data this week for additional clues on the Fed’s policy outlook. Meanwhile, oil prices continued to advance amid escalating Middle East tensions, increasing inflation concerns and strengthening expectations for rate hikes. While precious metals are traditionally viewed as a hedge against inflation, higher interest rates can weigh on demand for non-yielding assets by making interest-bearing investments more attractive.

Silver traded around $65.5 an ounce on Wednesday after sliding for two straight sessions, pressured by rising oil prices that heightened inflation concerns and strengthened expectations for interest rate hikes. Oil prices continued to climb after US forces destroyed five Iranian crude tankers near Kharg Island, the country’s main oil export hub, in retaliation for attempted missile attacks on a US warship. Investors also braced for key US inflation readings this week for further signals on the Federal Reserve’s next policy move. Markets are currently pricing in roughly a 60% chance of a 25-basis-point rate hike next week. Although precious metals are widely considered a hedge against inflation, higher interest rates can reduce demand for non-yielding assets by increasing the appeal of interest-bearing investments. Meanwhile, silver continued to find support from robust industrial demand, particularly from the solar energy and electrification sectors.