Silver Prices Retreat Amid Stronger US Dollar and Hawkish Fed Comments

Silver prices retreated on Monday from their highest level in a week, weighed down by a strengthening US dollar. The precious metal fell 0.8% to $65.73 an ounce, after reaching as high as $67.05 earlier in the day.

The decline comes as investors await further evidence of whether the Federal Reserve will continue its monetary tightening cycle for the remainder of the year. Minneapolis Federal Reserve President Neel Kashkari recently stated that inflation remains far too high and has broadened beyond the oil price shock caused by the Iran war.

This hawkish stance from a key Fed official increased expectations for another US interest rate hike in October, with investors closely monitoring further economic data and comments from officials to reassess those expectations. The probability of the Federal Reserve leaving interest rates unchanged in October fell from 48% to 46%, while the probability of a 25-basis-point rate hike increased from 52% to 54%.

The US Dollar Index rose over 0.1% on Monday, reflecting renewed strength in the US currency against a basket of major and secondary currencies. The advance was supported by demand for the dollar as an alternative investment amid escalating geopolitical tensions in the Middle East.