Silver prices extended their decline during Monday's late Asian session, falling to approximately $66.50 per ounce—the lowest level in over two months. The sell-off accelerated as market participants increasingly priced in further monetary tightening by the Federal Reserve, following stronger-than-expected US labor market data and persistent inflation concerns.
The white metal faced sustained selling pressure as investors reassessed the trajectory of US interest rates. According to the CME FedWatch tool, the probability of at least one rate hike this year surged to 73.8%, up sharply from 45.2% the prior week. Higher rate expectations have pushed US Treasury yields higher, diminishing the appeal of non-yielding assets like silver. The benchmark 10-year yield climbed to around 4.57% during early European trading, near a two-week high.
Strong Jobs Data Fuels Hawkish Expectations
Investor sentiment shifted after the latest Nonfarm Payrolls report revealed the US economy added 172,000 jobs in May, well above the market consensus of 85,000. Additionally, April's figure was revised upward to 179,000 from the previously reported 115,000. A resilient labor market is often seen as giving policymakers more leeway to keep interest rates elevated if inflation remains above target, reinforcing expectations of a prolonged restrictive stance.
This data-driven shift in rate expectations has weighed heavily on precious metals. For context, silver had recently attempted a rebound, as noted in our earlier coverage of silver testing $73.60 ahead of the jobs report, but the strong employment figures reversed that momentum.
Inflation Concerns Remain in Focus
Inflation worries have added to the pressure on precious metals markets. Elevated energy prices tied to the ongoing supply crisis have kept inflation elevated, and renewed geopolitical tensions—including recent exchanges between Israel and Iran over the weekend—have heightened fears of a broader conflict. Investors are now awaiting the release of the US Consumer Price Index (CPI) for May, scheduled for Wednesday. The headline CPI is expected to rise 4.2% year-on-year, up from 3.8% in April, which could further influence Fed policy expectations.
The interplay between inflation and rate expectations has also impacted other commodities. For instance, copper dipped below $14,000 amid tariff uncertainty and geopolitical risks, reflecting broader market caution.
Gold Declines Despite Geopolitical Risks
Gold also extended its decline on Monday, as investors weighed stronger US economic data, higher Treasury yields, and rising oil prices. Spot gold fell 0.4% to $4,313.11 per ounce, adding to Friday's nearly 3% drop that pushed prices to their lowest since March 24. US gold futures for August delivery declined 0.7% to $4,336.30.
While geopolitical tensions typically support gold through safe-haven demand, investors appeared more focused on the potential inflationary impact of higher energy prices and the possibility of tighter monetary policy. Markets are currently pricing in a 72% probability of a Fed rate hike by December, according to CME Group's FedWatch tool. Additional pressure came from Cleveland Federal Reserve President Beth Hammack, who stated on Friday that the labor market appeared close to full employment while inflation remained high enough to keep tighter policy options available.
Oil Prices Add to Inflation Fears
The Middle East conflict added another layer of uncertainty. Israel reported striking military targets in western and central Iran on Monday, despite reports that US President Donald Trump had urged Israeli Prime Minister Benjamin Netanyahu to avoid further attacks. Oil prices rose by more than $3 per barrel as traders evaluated the potential for a wider regional conflict and possible supply disruptions. Although higher oil prices can sometimes benefit gold through inflation concerns, the latest increase has instead strengthened expectations that the Fed may need to maintain or further tighten policy, limiting support for bullion.
Silver Technical Outlook
From a technical perspective, silver remains under pressure. XAG/USD was trading around $66.50 at the time of writing, well below its 20-day exponential moving average (EMA) at $74.44, indicating a bearish near-term trend. The Relative Strength Index (RSI) has fallen to 33.62, hovering just above oversold territory. While this suggests selling pressure remains dominant, it may also indicate that downside momentum is beginning to moderate.
On the upside, the 20-day EMA at $74.44 represents the first significant resistance level. A move above that level would be required to ease the current bearish outlook. On the downside, silver is approaching its near six-month low of $61.01. A break below that level could expose the metal to further declines toward the $60.00 mark.
This article is for informational purposes only and does not constitute financial advice.
