Silver slips 2.3% toward $65 as oil rebound revives inflation fears

Silver fell 2.31% to $65.05 an ounce on Tuesday, retreating from a seven-week high of $66.59 touched Monday, as a rebound in crude oil revived US inflation concerns and hardened expectations of tighter Federal Reserve policy.

"Current monetary policy is not hurting the economy," Cleveland Federal Reserve President Beth Hammack said Monday, arguing the Fed will need to raise interest rates more than once to bring inflation back toward its target.

WTI crude traded near $81.20 a barrel, up more than 5% since the start of the week, after negotiations to reopen the Strait of Hormuz stalled. Iran is conditioning the route's reopening on demands including the lifting of sanctions and war reparations, while Qatar said Tuesday that talks between Oman and Iran had reached an advanced stage but remained at a critical juncture.

Markets now price a 52% chance of a 25-basis-point rate hike at the Fed's September meeting, up from about 44% a day earlier, according to the CME FedWatch tool. The US Consumer Price Index due Wednesday is the next catalyst for the white metal.

Rate-Hike Odds Climb to 52% on Hawkish Fed Signals

Higher oil prices are keeping US Treasury yields elevated, reducing the appeal of silver, a non-yielding asset, while a stronger dollar makes the metal more expensive for investors holding other currencies. The dollar index held firm as rate-hike expectations firmed, adding to headwinds for the precious metal.

The move mirrors gold, which slid back below $4,400 an ounce after touching a two-month high of $4,435 earlier Tuesday, as the oil-driven inflation narrative lent support to the dollar at the expense of non-yielding bullion. Silver's retreat from its seven-week peak of $66.59 leaves the metal roughly 2.3% below Monday's close, with the $65.00 level now the immediate support to watch.

A stronger-than-expected CPI print on Wednesday could reinforce September rate-hike bets and extend pressure on silver, while softer inflation would ease tightening expectations and offer support. The Fed's next policy decision follows the data release, with Hammack's hawkish stance among the signals traders are weighing.

This article is for informational purposes only and does not constitute investment advice.