HG Markets

Silver Traders Battle Dollar Strength as US Inflation is in Focus


Harvest Global Markets :

On Tuesday, silver (XAG) prices continued their downward trend from the previous day. A strong U.S. dollar that gained 0.2% versus major currencies contributed to the price increase of silver for buyers from outside. Silver experienced a slight decline of 0.05%, settling at $23.16 per ounce. U.S. December Silver futures were also priced at $23.585, a penny less than before.

The decline in silver prices, which erased all gains recorded after the release of the U.S. consumer price index (CPI) data on July 12, provides evidence of altered investor expectations. The Federal Reserve may adopt a more dovish attitude in the future, which might include stopping rate increases in September or even signaling the end of the current cycle of rate hikes, according to several current suppositions.

However, the U.S. inflation figures will surely be the main topic of discussion this week. Even though overall headline inflation appears to be on the decline, any extended strength in the metrics could pose problems for silver and gold. Particularly, a CPI report on Thursday that beat expectations could spark conversations about more rate hikes at the forthcoming Federal Reserve meeting in September. These increases in bond yields may reduce the appeal of owning zero-yield bullion, bringing down the price of silver.

Other market factors also contribute to silver’s negative outlook. According to remarks made by Fed Governor Michelle Bowman, additional rate increases might be necessary to achieve the U.S. Federal Reserve’s 2% inflation target. China, the world’s largest consumer of gold, experienced a 14.5% reduction in July exports year over year, which is the worst decline since February 2020 and is putting pressure on silver demand. This, together with a 0.3% drop in the SPDR Gold Trust’s holdings, indicates a general negative mood.

The upcoming inflation report, the Federal Reserve’s outlook, and the state of the world’s trade may all point to a short-term decline in silver prices. To predict probable reactions, investors should closely monitor the next U.S. CPI data.

Share this post