Silver slumps over 6.5% as US inflation fears hit precious metals

Silver prices tumbled more than 6.5% to $77.8 per ounce on Friday, extending losses for a second consecutive session as selling pressure intensified across the precious metals market, according to market data.

Gold also declined, with spot prices falling as rising US Treasury yields and a stronger dollar weighed on non-yielding assets. Spot gold was down around 1.8% at $4,568.70 per ounce as of 0545GMT, heading for a weekly loss, while US gold futures also moved lower.

The selloff followed US inflation data released earlier this week showing price pressures accelerating again. Consumer prices rose 3.8% annually in April, up from 3.3% in March, while the energy index jumped 17.9% over the same period, according to the US Bureau of Labor Statistics.

Wholesale inflation also strengthened, with the Producer Price Index for final demand rising 1.4% in April, marking the biggest monthly gain since 2022. Producer prices increased 6% from a year earlier, adding to concerns that companies may pass higher costs on to consumers in the coming months.

Inflationary pressures have been driven largely by the prolonged Iran war and the closure of the Strait of Hormuz, which disrupted global energy flows and pushed oil and transportation costs higher.

Markets have now fully priced out the possibility of a Fed rate cut this year, while some investors are positioning for a possible rate hike by December as policymakers confront renewed inflation risks.

Higher interest-rate expectations tend to pressure precious metals by increasing the opportunity cost of holding non-yielding assets such as silver and gold, while also supporting the dollar.

Despite Friday’s sharp pullback, silver had outperformed other precious metals earlier in the week, supported by expectations of stronger industrial demand from electronics, solar panels and other applications that rely on the metal’s high electrical conductivity.