Strong Demand Fuels Inflation Concerns for Silver

Chicago Fed President Austan Goolsbee and Minneapolis Fed President Neel Kashkari have warned that inflation is not solely driven by energy prices, but also by strong domestic demand. This distinction is crucial for monetary policy outlook, as interest rates may need to remain higher for longer if inflation is supported by robust demand.

The CME FedWatch tool indicates a nearly 90% chance of at least one more interest rate hike this year, which would be a headwind for Silver. As a yieldless asset, Silver tends to lose appeal when interest rates and bond yields rise.

A potential reopening of the Strait of Hormuz could ease inflation concerns by encouraging a decline in Oil prices. This, in turn, might reduce pressure on US interest rate expectations and provide some support to Silver.