Silver prices (XAG/USD) are facing downward pressure in Tuesday’s American trading session, even as the United States (US) producer inflation figures for July showed a muted trend. The US Bureau of Labor Statistics (BLS) reported that the core Producer Price Inflation (PPI), excluding volatile food and energy prices, remained unchanged on a month-on-month basis. On an annual basis, the core PPI slowed down more than anticipated to 2.4% from the expected 2.7% and the previous release of 2.4%.
The subdued US producer inflation numbers have reinforced investor confidence in the ongoing moderation of price pressures. This sentiment has weighed on the US Dollar (USD) and bond yields, as market participants anticipate a significant interest rate cut announcement from the Federal Reserve (Fed) in September.
The US Dollar Index (DXY), which measures the Greenback’s strength against a basket of major currencies, has slipped below the critical support level of 103.00. Concurrently, 10-year US Treasury Yields have dropped to around 3.87%. Typically, lower yields on interest-bearing assets reduce the opportunity cost associated with holding non-yielding assets like Silver. However, Silver prices have also declined as investors await additional confirmation that inflation is moving towards the desired 2% target.
To gather more insights, investors are eagerly awaiting the release of the US Consumer Price Index (CPI) data for July on Wednesday. Projections indicate that both monthly headline and core inflation are expected to have increased by 0.2%. Annual figures for headline and core CPI are forecasted to have slightly decelerated to 2.9% and 3.2%, respectively.
Despite these factors, geopolitical uncertainties persist and are acting as a buffer against further declines in Silver prices. Investors are monitoring the situation closely amid expectations of heightened tensions in the Middle East following recent events, including the reported killing of a Hamas leader in Tehran, which has escalated concerns about a potential conflict between Iran and Israel.
