Silver prices weakened in European trading on Wednesday (July 15), even though the market began to reduce expectations for a Fed interest rate hike. XAG/USD fell 0.6% to near US$58.00 per troy ounce.

Pressure on silver arose after the June US CPI data showed a sharp slowdown in inflation. Headline inflation fell to 3.5% annually, while core inflation slowed to 2.6%.

This data also reduced the likelihood of a Fed interest rate hike this month. According to CME FedWatch, the probability of a July rate hike fell to 16.6%, significantly lower than 41.7% on Monday.

In theory, lower interest rate expectations

In theory, lower interest rate expectations should be positive for non-yielding assets like silver. However, rising oil prices due to the renewed escalation of attacks between the United States and Iran have limited silver's upside potential.

Rising energy prices risk reviving internasional inflationary pressures. If inflation rises again, central banks could maintain tight monetary policies for longer, weighing on silver and other precious metals.

The next market focus will be on the June US Producer Price Index (PPI) data. If the PPI again shows more benign inflation, silver could find support. However, if producer price pressures remain strong, XAG/USD could potentially come under further pressure. (arl)