Silver (XAG/USD) rallied sharply on Thursday, rising more than 2% to trade in the $29.30 range following the release of U.S. Producer Price Index (PPI) data, which showed mixed inflation signals. The precious metal broke out of a recent consolidation zone, buoyed by a weaker U.S. Dollar (USD).
The PPI, often viewed as a leading indicator for broader inflation trends, showed a mix of results for August. Monthly inflation readings came in higher than expected, but annual figures fell short. Notably, July’s data saw significant downward revisions. Following the release, the USD softened, which gave a boost to precious metals like silver and gold due to their inverse correlation with the currency.
In August, core PPI (excluding food and energy) rose 2.4% year-on-year, matching July’s figure but falling short of the 2.5% forecast. On a monthly basis, core PPI increased by 0.3%, higher than the revised 0.2% decline in July, and surpassing expectations of a 0.2% rise.
Headline PPI climbed 1.7% annually, down from the revised 2.1% gain in July, and below the 1.8% consensus. On a month-over-month basis, headline PPI advanced by 0.2%, beating the expected 0.1% rise and recovering from July’s flat reading.
Meanwhile, U.S. labor data revealed that initial jobless claims rose to 230,000 in the week ending September 6, slightly above the revised 228,000 from the previous week and in line with forecasts. Continuing jobless claims also ticked up to 1.85 million, marginally above the prior week’s revised 1.845 million figure.
Despite the market reaction to the PPI data, the outlook for U.S. interest rates remained largely unchanged. The likelihood of a larger 50 basis point rate cut at the Federal Reserve’s upcoming September meeting held steady at 13%-15%, according to the CME FedWatch tool, following a sharp decline in expectations after Wednesday’s CPI release.
