Silver prices dropped nearly 5% to $66 per ounce on Tuesday, the lowest since December 2025, as a stronger US jobs report lifted Federal Reserve rate hike odds to 70% and investors braced for a May CPI print expected at 4.2%.

Key Highlights

  • Silver fell nearly 5% to approximately $66 per ounce on Tuesday, its lowest level since December 2025.
  • US CPI for May is forecast at 4.2%, which would be the highest Inflation reading in nearly three years.
  • May payrolls surprised to the upside at 172,000 jobs, strengthening the case for Federal Reserve action.
  • Traders are now pricing roughly a 70% probability of a Federal Reserve rate hike in December 2026.
  • An Iran-Israel ceasefire temporarily eased oil-driven inflation concerns but left the broader outlook uncertain.

Silver Extends Decline Into Inflation Watch

Silver dropped nearly 5% on Tuesday, sliding to around $66 per ounce and retreating to its lowest point since December 2025. The move was driven by a reassessment of the US Interest Rate path rather than any sharp deterioration in industrial Demand, with markets squarely focused on Wednesday's Consumer Price Index release.

Expectations heading into the print are significant. Consensus forecasts project a May CPI reading of 4.2%, a level that would mark the highest inflation rate in nearly three years. Energy prices are the primary contributor, having risen sharply in recent months due to Supply constraints stemming from the Strait of Hormuz disruption. The anticipated figure has pushed investors to reduce exposure to non-yielding Assets, and silver has felt that pressure acutely.

Silver occupies a distinctive position among commodities. It functions both as a monetary metal, moving broadly in line with gold's response to real interest rates, and as an industrial input used across electronics, solar panels, and electrical components. In sessions where monetary factors dominate, silver tends to track gold lower. Tuesday's decline was driven primarily by the rate outlook, and the metal's dual character offered little insulation.

Labour Market Strength Reinforces Tightening Expectations

Last week's employment report sharpened the rate narrative. The US economy added 172,000 jobs in May, exceeding forecasts by a meaningful Margin. A labour market of that resilience reduces the probability that the Federal Reserve would pause tightening in response to growth concerns, effectively giving policymakers more room to act on inflation.

Traders responded by lifting the implied probability of a December 2026 rate hike to approximately 70%. The shift represents a material repricing of the Fed's forward path and has weighed directly on silver, where higher real yields increase the cost of holding a non-income-generating asset. The US dollar has also firmed in response to the revised rate expectations, adding a secondary headwind for dollar-denominated Commodity prices including silver.

The convergence of a strong jobs print and a looming inflation beat has created a near-term environment that is structurally unfavourable for precious metals. Whether that dynamic persists beyond Wednesday depends heavily on whether the CPI figure meets, exceeds, or falls short of the 4.2% forecast.

Ceasefire Eases but Does Not Resolve the Inflation Overhang

A partial offset came from the Middle East. Iran and Israel announced a halt to hostilities following a direct appeal from US President Donald Trump. The ceasefire pushed oil prices sharply lower, which offered modest relief to near-term inflation expectations by reducing the energy component that has been the primary driver of the projected CPI increase.

If the ceasefire holds and energy prices stabilise, it is possible that May's 4.2% print could represent a cyclical peak rather than the beginning of a sustained upward move. That outcome would reduce the urgency for aggressive Federal Reserve action and provide some support for silver and gold over the medium term. However, no formal diplomatic agreement has been reached, and the fragility of the ceasefire means that energy price relief could reverse quickly. The net effect on silver's near-term trajectory remains conditional on whether the geopolitical situation evolves toward a durable settlement.

Conclusion

Silver's nearly 5% decline on Tuesday reflects the dominant weight of the US interest rate narrative at this stage of the cycle. Strong employment data, a CPI forecast approaching a three-year high, and rising Federal Reserve tightening expectations have combined to push the metal to a six-month low. The Iran-Israel ceasefire provided a temporary softening of inflation pressure through lower oil prices but has not altered the fundamental rate outlook. Wednesday's inflation print will be the decisive near-term input for silver's direction.