Silver Slides as Oil Prices Surge and Rate Hike Bets Rise

Silver prices have retreated to around $65.05 as of Tuesday, down 2.31% on the day. This decline comes after the metal reached a seven-week high of $66.59 on Monday.

The drop in silver is largely due to rising oil prices and prospects of tighter monetary policy in the US. Oil has surged since the beginning of the week as negotiations over the Strait of Hormuz remain uncertain, with Iran making demands from Washington before reopening the strategic maritime route.

Despite some signs of easing tensions emerging, uncertainty remains, supporting energy prices and reviving concerns about US inflation. This, in turn, is helping to keep US Treasury yields elevated, reducing the appeal of silver as a non-yielding asset.

The increased expectations of further monetary tightening by the Federal Reserve are also providing some support to the US dollar and acting as an additional headwind for silver. The CME FedWatch tool now estimates a 52% chance of a 25-basis-point interest rate hike at the September meeting, up from approximately 44% the day before.