Weakening US Dollar and Fed Rate Expectations on Silver Prices
Despite a stronger-than-expected US Purchasing Managers Index (PMI), the US dollar has continued to lose traction and remains under pressure. This prompted Federal Reserve officials to delay the timing of the first interest rate cut this year. According to the CME FedWatch Tool, traders now see a 66% probability of a Fed rate cut in September, up from 59.5% last week.
The final reading of the US headline and Core Personal Consumption Expenditures (PCE) Price Index is expected to show a 2.6% year-on-year increase in May. The weakening US dollar and heightened expectations of a Federal Reserve rate cut are poised to bolster silver prices.
Investors will closely monitor speeches from Federal Reserve members Lisa Cook and Michelle Bowman on Tuesday. Key US economic data releases this week include the final reading of first-quarter Gross Domestic Product (GDP) on Thursday and the May Personal Consumption Expenditure (PCE) Price Index report on Friday.
Geopolitical Tensions Boost Safe-Haven Demand for Silver
Safe-haven demand for silver may strengthen due to geopolitical tensions in the Middle East and Ukraine. Israeli Prime Minister Benjamin Netanyahu stated that the most intense phase of the assault on Hamas in Gaza is nearing its conclusion but emphasized that the broader conflict continues.
Meanwhile, Russia criticized the United States for a missile attack in Crimea, which killed at least four people, including children, and injured 151 others. Russia’s Foreign Ministry summoned US Ambassador Lynne Tracy, accusing the US of initiating a “proxy war.”
These geopolitical tensions in the Middle East and Ukraine increase demand for safe-haven assets like silver, pushing prices higher amid global uncertainty and conflict-related concerns.