Silver Slips on Rising Oil Prices

Silver fell toward $57.5 an ounce on Wednesday, paring gains from the previous session as rising oil prices intensified inflation concerns and strengthened expectations for interest rate hikes. Oil resumed its upward trend after a diplomat dismissed reports that a deal to end the US-Iran conflict was imminent, although negotiations remain underway. Rising tensions in the Middle East and Eastern Europe, along with increased attacks on tankers in the Strait of Hormuz, further heightened concerns over supply disruptions. Meanwhile, the US Federal Reserve is widely expected to leave interest rates unchanged next week, though markets anticipate a possible rate hike in December. The Bank of Japan and the European Central Bank are also expected to maintain their policy rates next week. Although metals are traditionally considered a hedge against inflation, higher interest rates tend to weaken their appeal compared with interest-bearing assets.

Silver prices hovered around $57.20 an ounce on Tuesday, remaining close to recent multi-week lows as rising oil prices fueled inflation concerns and prompted investors to reassess the US interest rate outlook ahead of next week’s Federal Reserve meeting. Brent crude climbed to a five-month high amid renewed Houthi attacks and reports of vessel strikes in the Gulf, heightening concerns over regional supply disruptions and strengthening expectations of tighter monetary policy. While the Fed is widely expected to keep rates unchanged next week, investors will closely monitor its forward guidance for signals on a possible December hike. Markets are currently pricing in a more than 90% chance of a rate increase, according to the CME FedWatch Tool.

Silver prices fell to around $56.5 per ounce on Tuesday, extending recent losses as elevated oil prices heightened inflation concerns and reinforced expectations of tighter monetary policy. The metal also faced pressure from a stronger US dollar and rising bond yields. Oil prices remained firm amid ongoing hostilities in the Middle East and Eastern Europe, while Iran continued to assert its control over the Strait of Hormuz. Meanwhile, the US Federal Reserve is widely expected to keep interest rates unchanged next week, with markets pricing in roughly a 94% probability of a rate hike in December. Elsewhere, the European Central Bank is expected to implement at least one additional 25-basis-point rate increase this year to address persistent inflationary pressures. Bank of Japan Governor Kazuo Ueda also noted that underlying inflation was “quite close” to the central bank’s 2% target, signaling the possibility of further monetary tightening.