Silver prices (XAG/USD) traded within a narrow range around $28.60 during Wednesday’s European session, maintaining gains supported by a weakened US Dollar. Despite the release of a strong United States Producer Price Index (PPI) inflation report for April, the dollar depreciated sharply.
Annual PPI figures met expectations while monthly figures surpassed them. The US Dollar Index (DXY) dipped slightly below 105.00, enhancing the appeal of dollar-denominated silver. Federal Reserve (Fed) Chairman Jerome Powell described the overall data as mixed and ruled out further rate hikes, instead emphasizing the need for a prolonged restrictive monetary policy to curb inflation.
Amidst these developments, 10-year US Treasury yields continued to decline to 4.43%, as traders increasingly anticipate Fed interest rate cuts starting from the September meeting. Lower yields on interest-bearing assets reduce the opportunity cost of holding non-yielding assets like silver.
Investors are eagerly awaiting the release of the US Consumer Price Index (CPI) and monthly Retail Sales data for April at 12:30 GMT, as these economic indicators will heavily influence speculation regarding potential Fed rate adjustments.
The persistence of higher US consumer inflation in the first quarter suggests that reaching the 2% inflation target may be more challenging than anticipated. A higher-than-expected US inflation report could intensify concerns about sustained inflation, impacting market expectations for future Fed actions.
