Silver Weakens, ISM-ADP Makes Market More Hawkish

Silver prices weakened on Wednesday (June 3rd), hovering around US$73.27 per troy ounce, down around 2.5% and approaching a two-week low. Pressure stemmed from a combination of "higher for longer" sentiment and geopolitical uncertainty, keeping the market cautious.

From the US side, the latest labor data further reinforced the argument that the economy hasn't cooled enough to allow for rapid easing. The ADP report showed an increase of 122,000 private sector jobs in May, exceeding expectations. Meanwhile, the ISM Services PMI rose to 54.5 in May, higher than expected, indicating continued expansion in service activity.

This data came after the JOLTS report showed a surge in US job openings, reinforcing the perception that the labor market remains resilient. This combination makes it more difficult for the market to return to a dovish scenario, especially as energy prices rebound amid the ongoing US-Iran tensions.

The US dollar index also remained firm at around 99

The US dollar index also remained firm at around 99, in line with expectations that interest rates have not yet moved lower. A strong dollar typically puts pressure on USD-denominated precious metals, including silver.

In Europe, markets are increasingly locking in expectations of an ECB interest rate hike at next week's meeting, with some market participants still opening up the possibility of further tightening after that. With energy inflation returning as an issue and strong US data, silver is temporarily more sensitive to the direction of interest rates and the dollar than its geopolitical hedging function. (arl)

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