Silver Falls on Hawkish Fed Outlook

Silver slipped below $67 an ounce on Wednesday, giving up gains from the previous session as hawkish signals from Federal Reserve officials outweighed the impact of falling oil prices on the inflation and interest rate outlook. On Tuesday, Richmond Fed President Tom Barkin warned that inflationary shocks could take time to fade, while Boston Fed President Susan Collins said she supported last week’s rate hike amid concerns that future inflation could remain above the 2% target. Meanwhile, oil prices extended their decline for a sixth straight session after President Trump said US officials had a “very good” meeting with Iranian envoys, while Tehran said it could reopen the Strait of Hormuz within seven days if the US eases military pressure and lifts its blockade of Iranian ports. Lower oil prices help reduce concerns over higher inflation and further rate hikes.

Silver strengthened above $67 an ounce on Wednesday, extending gains from the previous session as oil prices declined for a sixth consecutive session, easing concerns over higher inflation and interest rates. Oil prices continued to fall after President Donald Trump said US officials had a very good meeting with Iranian envoys, while Tehran said it could reopen the Strait of Hormuz within seven days if the US eases military pressure and lifts its blockade of Iranian ports. Reports also indicated that Saudi Arabia plans to restore oil exports through its East-West pipeline in the coming days. Meanwhile, Richmond Fed President Tom Barkin warned on Tuesday that inflationary shocks could take time to fade, with a risk that elevated price pressures could become entrenched. Last week, the Fed delivered its first rate hike in three years, while signaling further tightening to contain inflation.

Silver fell below $66 an ounce on Tuesday, remaining under pressure as hawkish remarks from Federal Reserve officials reinforced expectations that US interest rates will stay higher for longer. The US central bank raised its policy rate by 25 basis points last week, its first such move in three years, while Chair Kevin Warsh signaled that further rate increases could come in the months ahead. Other Fed officials, including St. Louis Fed President Alberto Musalem and Chicago Fed President Austan Goolsbee, continued to stress the need for additional tightening to contain inflation fueled by strong demand and rising energy prices. Markets are now pricing in roughly a 90% chance of another rate hike in December, according to the CME FedWatch Tool. Meanwhile, oil prices fell for a fifth consecutive session following reports that Iran could reopen the Strait of Hormuz within seven days if the US takes initial steps to ease military pressure.