Odds of Fed Hike Drop; Silver Draws Renewed Interest
Silver prices rebounded during Friday's trading (August 14) following a correction in the previous session. XAG/USD traded around US$64.71 per troy ounce—up approximately 0.4%—after dipping to the US$63.52 level. This movement indicates that buying interest is returning after profit-taking weighed on the precious metal on Thursday.
Key support stemmed from relatively cooler US inflation data. The July Producer Price Index (PPI) remained unchanged month-on-month and slowed to 4.7% year-on-year, down from 5.5% in June. Core PPI rose just 0.2% month-on-month, missing the 0.3% forecast. These figures complement the July Consumer Price Index (CPI) data, which also showed no signs of a surprise inflation spike.
The combination of moderate CPI and PPI readings led the market to further scale back expectations for a Federal Reserve rate hike. The probability of a Fed hike in September now stands in the 33%–35% range, significantly lower than the ~55% seen a week earlier. This environment tends to favor silver, as reduced rate-hike risks lower the opportunity cost of holding non-yielding assets.
However, inflation risks have not entirely vanished. US-Iran tensions and shipping disruptions in the Strait of Hormuz still have the potential to trigger a surge in oil prices. Should energy costs spike again, inflationary pressure could mount, reigniting expectations for a hawkish Fed policy.
Investor focus now shifts to US Retail Sales data, due for release Friday evening. The consensus forecast anticipates a 0.1% month-on-month rise in July retail sales, down from the previous 0.2%. Weaker consumption data could further alleviate pressure for a Fed hike, whereas strong figures might provide fresh support for the dollar and Treasury yields.
Newsmaker Analysis: Silver's short-term fundamentals remain largely positive as US inflation cools and expectations for a Fed rate hike continue to decline. The US$64 level serves as a key support zone, while the US$65–US$66 range acts as the immediate resistance. If US retail sales weaken and the dollar falls alongside them, silver has the potential to retest the US$66 level and open the way toward the US$67 area. Conversely, strong consumption data could trigger renewed profit-taking.
Source: Newsmaker.id
