Silver Eases Ahead of US Inflation Data

Silver prices edged lower toward $53 an ounce on Tuesday, giving back part of the previous session’s gains as investors awaited a key US inflation report that could shape expectations for Federal Reserve monetary policy. Markets are now pricing in an 84% probability of a Fed rate hike in December as policymakers continue to face persistent inflationary pressures, up from roughly 74% a week earlier. Higher interest rates raise the opportunity cost of holding non-yielding assets, making precious metals less attractive to investors. Meanwhile, silver gained nearly 3% on Monday as oil prices plunged amid growing optimism over a potential peace agreement between the US and Iran. President Donald Trump expressed confidence that the conflict in Iran was approaching an end following discussions with Qatar’s prime minister. Lower crude prices could help ease inflationary pressures, potentially reducing the need for further monetary policy tightening.

Silver climbed more than 1% to $52.7 an ounce on Monday, supported by lower oil prices that eased inflation concerns, as investors awaited US CPI and PPI data due later this week for further clues on the Federal Reserve’s monetary policy outlook. The advance follows a 6% rally last week, after Democrats won control of both chambers of Congress in the US midterm elections, raising hopes for a potential end to the US-Israeli war with Iran. Oil prices fell sharply on Monday after US President Donald Trump downplayed the likelihood of further strikes against Iran. These gains came despite a stronger-than-expected US employment report released on Friday, which reinforced expectations that the Federal Reserve could keep interest rates higher for longer, supporting the US dollar and Treasury yields. Markets currently assign an 81% probability to a Fed rate hike in December, according to the CME FedWatch Tool.

Silver climbed above $53 per ounce on Monday, extending last week’s gains as weaker oil prices eased inflationary pressures, although expectations of a more hawkish Federal Reserve capped further upside. Oil prices remained under pressure after President Donald Trump said it was “highly unlikely” he would authorize additional strikes on Iran if negotiations over its nuclear program and the reopening of the Strait of Hormuz make significant progress. Meanwhile, US data released on Friday showed that job growth accelerated in October, while the unemployment rate declined to 4.1%, highlighting the resilience of the labor market and strengthening expectations of a potential Fed rate hike in December. Markets are now pricing in an approximately 81% probability of a quarter-point rate increase before year-end, up from 71% ahead of the employment report. Investors are now turning their attention to key US inflation data due this week for further clues on the Fed’s monetary policy direction.