Silver prices slipped in the European market on Wednesday to a two-week low, deepening losses for a second consecutive day and falling below $37 an ounce, pressured by the rise of the US dollar in the foreign exchange market.

Demand for the US currency remains strong as the best available investment, especially amid growing doubts over the likelihood of a Federal Reserve rate cut in September.

To reassess those expectations, investors are awaiting later today the release of the minutes from the latest Federal Reserve meeting, along with the upcoming Jackson Hole symposium.

Price Overview

• Silver prices fell by around 1.2% to $36.96 an ounce, the lowest since August 4, from the opening level of $37.39, after hitting a high of $37.44 earlier in the session.

• At Tuesday’s settlement, silver lost 1.7%, its biggest daily drop since July 30, pressured by gains in the US dollar and Treasury yields.

US Dollar

The dollar index rose 0.15% on Wednesday, extending gains for a third straight session to the highest level in over a week at 98.44 points, reflecting continued strength of the greenback against a basket of major and minor currencies.

This rise comes as investors seek the dollar as the most attractive asset, while awaiting comments from Federal Reserve Chair Jerome Powell on Friday in Jackson Hole, where markets expect a pushback against pricing in a September rate cut.

US Interest Rates

• According to CME’s FedWatch tool, markets are currently pricing in an 83% chance of a 25-basis-point rate cut at the September meeting, and a 17% chance of no change.

• For October, markets are pricing in a 92% probability of a 25-basis-point cut, and an 8% chance of rates being left unchanged.

• To reprice these expectations, investors are closely monitoring today’s Fed minutes and upcoming remarks from key Fed policymakers.

Silver Outlook

At Economies.com, we expect that if the Fed’s comments prove more hawkish than markets anticipate, the odds of a September rate cut would diminish, putting further downward pressure on non-yielding assets, especially precious metals like gold and silver.

Gold prices rose in the European market on Wednesday, attempting to recover from a three-week low recorded earlier in Asian trading, supported by bargain hunting at lower levels.

However, the recovery remains capped by strength in the US dollar, which is being bought as the preferred safe-haven investment ahead of the release of the Federal Reserve’s latest meeting minutes.

The Price

•Spot gold rose 0.35% to $3,327.65, up from the session’s opening level of $3,315.84, after touching an intraday low of $3,311.58, the weakest level since August 1.

•At Tuesday’s settlement, gold lost 0.5%, marking its second straight daily decline under pressure from a stronger US dollar and higher US bond yields.

The US Dollar

The dollar index rose 0.15% on Wednesday, extending gains for a third consecutive session and reaching a one-week high of 98.44, reflecting continued strength in the US currency against a basket of major and minor counterparts.

Markets now turn their attention to Fed Chair Jerome Powell’s speech on Friday at Jackson Hole, where traders are looking for any pushback against market pricing of a rate cut next month.

US Interest Rates

•According to CME’s FedWatch Tool, the probability of a 25 basis-point rate cut in September is currently priced at 83%, with a 17% chance of no change.

•For October, probabilities are priced at 92% for a 25 basis-point cut and 8% for no change.

•Investors are closely watching the Fed minutes due later today and comments from policymakers to reassess these expectations, alongside Powell’s upcoming remarks at Jackson Hole.

Gold Outlook

Kelvin Wong, market analyst at OANDA for Asia-Pacific, said the stronger US dollar and improved risk appetite following recent geopolitical developments are weighing on gold, with markets awaiting Powell’s remarks at Jackson Hole for further direction.

SPDR Gold Trust

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by 3.16 metric tons on Tuesday, bringing the total down to 962.21 metric tons. This compares with 965.37 metric tons, the highest level since September 9, 2022.

The UK economy released its annual headline CPI on Wednesday, showing a rise of 3.8% in July, the fastest pace since January 2024. This came in above market expectations of a 3.7% increase, and also higher than the previous reading of 3.6%.

The annual core CPI also rose 3.8%, exceeding both market expectations of 3.7% and the prior reading of 3.7%.

These figures highlight the continued divergence of prices from the Bank of England’s 2% medium-term inflation target, reflecting persistent inflationary pressures on policymakers and reducing the likelihood of a rate cut in September.

•This release is “positive” for the British pound.

The British pound declined in European trading on Wednesday against a basket of major currencies, deepening losses for the third consecutive session against the US dollar and hitting a one-week low. The drop came amid continued strength in the greenback ahead of the annual Jackson Hole Economic Symposium.

Expectations for a September rate cut by the Bank of England have eased following the central bank’s latest policy meeting and a run of strong UK economic data. Investors are now awaiting the release of July inflation figures later today to reassess the outlook.

Price Overview

• The pound fell more than 0.2% against the dollar to $1.3462, its lowest level since August 12, from an opening price of $1.3492, after touching a session high at $1.3493.

• On Tuesday, the pound lost 0.1% against the dollar in a second straight daily decline, driven by renewed demand for the US currency as a safe-haven asset.

US Dollar

The dollar index rose 0.15% on Wednesday, extending gains for a third consecutive session to hit a one-week high of 98.44, reflecting persistent strength in the US currency against a basket of majors and minors. Markets remain focused on Fed Chair Jerome Powell’s speech at Jackson Hole on Friday, which could shape expectations for a potential rate cut next month.

UK Interest Rates

• Following last week’s hawkish Bank of England meeting, traders pared back bets on rate cuts, now pricing in an additional 17 basis points of easing this year.

• Current pricing for a 25-basis-point cut at the September meeting stands below 20%.

UK Inflation Data

Later today, investors await key UK inflation readings for July, which are expected to heavily influence the Bank of England’s policy path. The headline CPI is forecast to rise 3.7% year-on-year, slightly up from 3.6% in June, while core CPI is expected to remain steady at 3.7%.

Outlook for the Pound

We at Economies.com expect that if UK inflation prints above market forecasts, expectations for a September BoE rate cut will diminish, supporting a recovery in the pound.