Silver (XAG/USD) halted its four-day winning streak, trading around $62.30 per troy ounce during European hours on Monday, as market expectations for a Federal Reserve interest rate hike later this year solidified. The CME FedWatch tool indicated that financial markets are currently pricing in a 77% probability of a rate increase by year-end, which has weighed on the non-yielding precious metal [1].
This minor decline in silver follows a strong previous week, during which the metal surged over 5.55%. The rally was triggered by weaker-than-expected US labor data: June's Nonfarm Payrolls (NFP) grew by just 57,000, significantly below the 110,000 forecast. Despite the headline unemployment rate unexpectedly ticking down to 4.2% from May's 4.3%, the sharp slowdown in hiring highlighted broader economic cooling [1].
Easing oil prices have also contributed to dampening inflationary pressures, which previously heightened fears of aggressive Fed rate hikes. Energy markets moved lower due to recovering flows through the Strait of Hormuz and the prospect of increased OPEC+ supply. This cooling in the energy sector has mitigated a key macroeconomic headwind, providing some structural relief to non-yielding precious metals like silver [1].
Investors are expected to closely monitor the US ISM Services PMI due later in the day for immediate direction, but the primary focus has shifted to Wednesday’s release of the Fed's June policy Meeting Minutes for clearer guidance on the future path of interest rates [1].
CONCLUSION
Silver prices have come under pressure as markets increasingly anticipate a Federal Reserve rate hike by year-end, with a 77% probability priced in. While recent weak US labor data and easing oil prices have provided some support, the outlook for silver remains closely tied to upcoming US economic data and Fed policy signals.