Silver price (XAG/USD) trades in a tight range at around $63.50 during the Asian trading session at the start of the week. The white metal struggles for a direction but is close to an almost seven-week high of $65.16 posted on Friday.
Bullions are expected to face heightened volatility, with the United States (US) Consumer Price Index (CPI) data for July on the radar, releasing on Wednesday.
The impact of the US CPI data will likely be significant on the Federal Reserve (Fed) interest rate expectations, as comments in the July monetary policy statement signaled that officials are heavily concerned about high inflation and are committed to bringing price pressures down to the 2% target.
Higher US inflationary pressures prompt Fed interest rate hike risks, a scenario that bodes poorly for non-yielding assets, such as Silver.
On Friday, the Silver price gained sharply as traders scaled back hawkish Fed bets for the September policy meeting after the release of the US Nonfarm Payrolls (NFP) data for July, which showed a reduction in the overall labor force.
According to the CME FedWatch tool, the odds of the Fed raising policy rates in the September meeting are 46%, a sharp decline from 67% seen a week ago.
The US NFP report showed employers fired 23K workers, while they were anticipated to create 80K fresh jobs. Also, June’s NFP print was revised lower to 20K from 57K.
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.