Silver Slips on Rate-Hike Fears

Silver prices stayed below $58 an ounce on Wednesday as elevated oil prices heightened inflation concerns ahead of next week’s Federal Reserve meeting. The metal has faced sustained pressure in recent weeks as expectations of further monetary tightening weighed on demand for non-yielding assets. Markets expect the Fed to hold interest rates steady on October 28, while pricing in a potential hike in December amid persistent price pressures. Investors are also awaiting next week’s US PCE inflation report, the Fed’s preferred measure of inflation. Recent stronger-than-expected US consumer and producer inflation data have reinforced concerns that rising energy costs could keep inflation elevated. Meanwhile, UK inflation climbed to an 11-month high of 3.5% in September, strengthening expectations that the Bank of England could raise interest rates as soon as November.

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.