Silver price (XAG/USD) extends its losses for the second consecutive day, trading around $63.50 per troy ounce during the Asian hours on Friday. Silver price falls as investors opted to take profits while weighing the Federal Reserve’s (Fed) monetary policy trajectory alongside ongoing geopolitical tensions in the Middle East.
Cooling inflation data further shaped market sentiment, as the Bureau of Labor Statistics reported that US wholesale prices for goods and services remained flat in July. This came in softer than the expected 0.2% growth and followed a revised 0.1% decline in June. Excluding the volatile food and energy sectors, core Producer Price Index (PPI) figures nudged up 0.2%, slightly below the consensus estimate of 0.3%. On a year-over-year basis, headline PPI rose 4.7% while core PPI increased 4.2%.
These softer inflation numbers have prompted market participants to recalibrate their expectations for Federal Reserve interest rate policy. According to the CME FedWatch Tool, the implied probability of a rate hike at the Fed’s September meeting dropped to 34.8%, down from 40% immediately following the PPI release. At the same time, diplomatic negotiations to reopen the Strait of Hormuz have stalled, leaving investors wary of a potential escalation that could spark higher energy costs and rekindle inflationary forces.
Silver draws strong CTA interest as prices test key trigger
According to TD Securities, "Silver stands out for near-term CTA flows," with the bank highlighting that "prices above $66.80/oz" are "likely to see further buying." Their models suggest that commodity trading advisers are "likely to add 3-4% of historic max length under all pricing scenarios into next week," underscoring robust systematic demand for the metal on sustained price strength.
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