Silver Slides to Near 2-Month Low

Silver fell toward $60 an ounce on Thursday, hitting its lowest levels in nearly two months as elevated oil prices and Treasury yields outweighed support from softer-than-expected US inflation data. The US PCE price index rose 0.3% in August, below the 0.4% forecast, while core PCE increased 0.2%, also falling short of expectations for a 0.3% gain. On an annual basis, headline PCE inflation came in at 3.4%, below the expected 3.7%. Markets now see roughly a 38% chance of a Federal Reserve rate hike in October, down from 51% before the PCE release. Meanwhile, oil prices remain elevated as the US and Iran make little progress in negotiations despite signs of recovering Middle East flows. Treasury yields also climbed to multi-decade highs amid concerns over persistent energy-driven inflation, which could prompt tighter monetary policy.

Silver remained below $61 an ounce at the end of September, down around 8% for the month and close to its lowest level since early August. Precious metals remained under pressure from elevated Treasury yields, while persistent energy-driven inflation and hawkish comments from Fed officials reinforced expectations of further policy tightening later this year. Still, softer-than-expected US inflation data and relatively dovish remarks from New York Fed President John Williams eased expectations of another rate hike as soon as next month. The PCE price index rose 0.3% in August, below expectations of 0.4%, while core PCE increased 0.2%, also below forecasts of 0.3%. Year-on-year, headline PCE inflation stood at 3.4%, below expectations of 3.7%. Williams said the Fed does not need to rush into another rate increase following this month’s hike. Markets are now pricing in a below 40% chance of a 25 bps rate hike in October, down sharply from 70% last Friday.

Silver steadied above $61 an ounce on Wednesday, halting a recent decline with falling oil prices offering some support despite continued pressure from elevated Treasury yields. Oil prices dropped sharply amid signs of improving energy flows from the Middle East and following another major release of emergency reserves in the US. Meanwhile, precious metals remain under pressure from rising Treasury yields, with the 30-year US bond yield climbing as high as 5.62%, reaching levels not seen since June 2002. Concerns over persistent energy-driven inflation, along with hawkish remarks from Federal Reserve officials, helped push yields higher. New York Fed President John Williams said Tuesday that another rate increase “late this year” could be appropriate, while noting that the Middle East conflict and the expansion of artificial intelligence remain key drivers of elevated inflation. Silver is on track to decline nearly 8% in September.