Silver prices (XAG/USD) climbed to $28.60 during Tuesday’s New York session, buoyed by a weakening US Dollar. This increase comes despite a stronger-than-expected Producer Price Index (PPI) report from the United States Bureau of Labor Statistics (BLS).
The PPI for April grew by 0.5% on a monthly basis, exceeding the projected 0.3%, signaling ongoing price pressures at the beginning of the second quarter. The Core PPI, which excludes volatile food and energy prices, also rose by 0.5%. Annual headline and core PPI figures met expectations at 2.2% and 2.4%, respectively.
These inflationary pressures have fueled concerns that the Federal Reserve (Fed) might delay any interest rate cuts beyond September or maintain the current rate range of 5.25%-5.50% throughout the year. Consequently, the US Dollar Index (DXY), which measures the dollar’s strength against six major currencies, dropped to 105.00. As the dollar weakens, the attractiveness of dollar-denominated silver increases.
In the bond market, 10-year US Treasury yields fell to 4.46%. Typically, rising inflation risks push yields on interest-bearing assets higher. However, in this instance, the decline in bond yields reduces the opportunity cost of holding non-yielding assets like silver.
Looking ahead, the release of the US Consumer Price Index (CPI) data for April on Wednesday will be a critical indicator for investors. This data will provide insights into the future movements of silver prices, the US Dollar, and bond yields. Additionally, the upcoming monthly Retail Sales report, also due on Wednesday, will be closely watched for further economic cues.
