Key Highlights

  • Silver traded near $63 an ounce on Tuesday, hovering near five-week lows.
  • Elevated oil prices strengthened expectations for a Fed rate hike this week.
  • Markets are pricing in roughly a 92% chance of a 25 basis point hike on Wednesday.
  • The US 10-year Treasury Yield climbed toward 5%, adding further pressure on non-yielding metals.

Silver traded near $63 an ounce on Tuesday, hovering near five-week lows as elevated oil prices strengthened expectations for a US Federal Reserve Interest Rate hike this week.

What Happened

Oil prices extended their gains as Saudi Arabia's East-West pipeline remained shut, while Ukraine disputed President Trump's claim that it had already reached an agreement with Russia to halt attacks on energy infrastructure. Rising energy prices fueled Inflation concerns and increased pressure on the Fed to tighten policy, with markets currently pricing in roughly a 92% chance of a 25 basis point rate hike on Wednesday.

As with gold, the disputed status of the Russia-Ukraine energy truce adds uncertainty to how long the current oil-driven inflation pressure might persist.

Market Reaction

The US 10-year Treasury yield also climbed toward 5% amid inflation and fiscal concerns, adding further pressure on non-yielding metals. Elsewhere, the Bank of Japan is also expected to raise rates on Friday, as elevated energy costs and ongoing tensions in the Middle East continue to complicate the inflation outlook.

Silver's dual role as both a precious and industrial metal means it can also be sensitive to broader growth expectations, layering additional Volatility on top of the same rate-driven pressure affecting gold.

Outlook

Wednesday's Fed decision, along with the Bank of Japan's rate decision on Friday, represent the next major catalysts for silver prices, given the direct pressure higher rates place on non-yielding metals.

Continued monitoring of the Saudi pipeline repair timeline and the disputed Russia-Ukraine energy truce is likely to remain relevant for the broader Commodity complex, including silver.