Silver prices fell on Tuesday to their lowest since early April, taking a lead from a sharp drop in gold prices.
Silver prices dropped as low as $26.31 an ounce, from around $27.10 an ounce in late trades on Monday, moving in line with a consistent fall in the value of gold through the day.
The latest round of EU and US data on Tuesday suggested inflation was running higher than expected, bolstering the case for central banks to put off interest rate cuts until later in the year. This added to a recent decline in bets on the first US Fed interest rate cut happening in June, with the market now favouring September or November.
A higher-for-longer scenario for interest rates tends to dent the appeal of holding gold and silver as non-interest-bearing assets.
Moreover, US treasury yields rebounded strongly on Tuesday, recovering from a slump over the last few days, while the US dollar also strengthened against other major currencies, both of which contributed to the downward pressure on silver prices.
Looking ahead, the US ISM manufacturing PMI figures for April are due for release Wednesday, as well as the JOLTs job openings for March, for the latest pulse check on the US economy. Few surprises are likely from the US Fed’s interest rate decision later on Wednesday, with the markets widely expecting no change from the current rate of 5.25-5.5%.
Of more significance will be any guidance emanating from the Fed on the future path for monetary policy in the coming months, especially considering that inflation continues to run hot. Policymakers will be wanting to see evidence that inflation is coming down towards the 2% target before firing the starting gun on a rate-cutting cycle.
Frank’s experience covering the commodities markets spans 22 years, with a particular specialism in metals, carbon and energy markets. He has worked as a senior editor for S&P Global Commodity Insights (formerly Platts) and before this, at ICIS-LOR, a part of Reed Business Information (Reed Elsevier), where he covered the petrochemicals markets from 2003 to 2005.
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