Silver (XAG/USD) surged by 1.25% to nearly $67.00 during the Asian trading session on Tuesday, buoyed by a decline in the US Dollar Index (DXY), which fell 0.1% to around 98.83, and a drop in 10-year US Treasury yields by 0.17% to approximately 4.77% [1]. The weakening of the US Dollar and lower bond yields increased the appeal of non-yielding assets like silver, as investors shifted their attention to the upcoming US Consumer Price Index (CPI) data for August, scheduled for release on Friday [1]. Technical analysis shows XAG/USD trading at $66.97, maintaining a constructive near-term bias above the nine-day Exponential Moving Average (EMA) at $66.49, with the Relative Strength Index (RSI) at 55, indicating ongoing bullish momentum [1].
Gold (XAU/USD) also attracted buyers during the Asian session, reversing a two-day losing streak as the US Dollar retreated from a three-week high, partly due to a rally in the Japanese Yen [2]. Despite this, expectations of a hawkish US Federal Reserve and ongoing geopolitical uncertainties, particularly involving Iran and the Middle East, provided some support to the US Dollar and limited gold's gains [2]. Traders remained cautious, awaiting the release of both the US Producer Price Index (PPI) on Thursday and the CPI on Friday, which are expected to provide further direction for the Fed's policy outlook and influence near-term USD price dynamics [2].
According to TD Securities, the August CPI report is expected to show core inflation remaining contained, with core prices rising 0.19% month-over-month (2.3% year-over-year), mainly driven by the services segment, while core goods prices may decline modestly [1]. Headline CPI is projected to increase by 0.37% month-over-month (3.4% year-over-year), influenced by higher energy and food prices, with risks skewed to the upside [1]. OCBC strategists noted that the recent US Nonfarm Payrolls report, which showed accelerated job growth in August, supports the US Dollar but is not sufficient alone to drive a sustained rally, emphasizing that markets are awaiting firmer inflation evidence before pricing in a September Fed rate hike [2].
Geopolitical tensions, particularly Iran's threats to retaliate against US actions and potentially blockade the Strait of Hormuz, have heightened concerns about energy supply disruptions and inflationary pressures, further underpinning the case for Fed policy tightening and supporting safe-haven demand for both the US Dollar and precious metals [2].
CONCLUSION
Both silver and gold prices benefited from a weaker US Dollar and lower Treasury yields as investors await crucial US inflation data later this week. While technical and fundamental factors support the near-term bullish momentum for precious metals, market participants remain cautious, with the upcoming CPI and PPI releases expected to provide clearer direction for the Federal Reserve's policy path and the broader market.