Dollar Unwind Fuels Silver Rally, But Inflation Concerns Linger

The US dollar's decline has been supporting silver prices, despite rising bond yields and concerns over inflation. The 30-year yield has reached its highest level since 2007, but this hasn't halted the rally in silver. Instead, it appears that the unwind of long-dollar positioning ahead of the Fed meeting is driving silver higher.

However, this trend may not last indefinitely, as Federal Reserve Governor Warsh's recent comments have left room for a potential rate hike in September. The next inflation print or payrolls report could shift the focus back to monetary policy and potentially halt the dollar's decline. This would likely put pressure on silver prices.

The price of crude oil is also playing a crucial role in the outlook for silver. As long as it remains above $85, the hawks at the Fed will have an argument to support a rate hike, citing rising energy costs and inflation concerns. This could lead to a narrowing of the window for a potential September rate hike.

The odds of a rate hike in September are currently falling, which is supporting silver prices. However, this trend may reverse if the next data release or another oil headline suggests that inflation is still a concern.