Silver climbs 2.3% as softer US inflation data weakens dollar

Silver rose to $31.84 an ounce Thursday, up 2.3%, after softer-than-expected US inflation data pushed the dollar lower and boosted demand for precious metals.

"The PCE data confirms inflation is moderating despite the energy shock, which removes pressure for immediate Fed tightening," said Ole Hansen, head of commodity strategy at Saxo Bank. "A weaker dollar is the primary catalyst for silver's move."

The US Dollar Index fell nearly 1% to 99.94, its lowest level in months, after the Bureau of Economic Analysis reported June Personal Consumption Expenditures inflation at 3.7% year-over-year, down from 4.1% in May. Core PCE, which excludes food and energy, eased to 3.3% from 3.4%. Both readings matched economists' forecasts. Second-quarter GDP growth slowed to an annualized 1.5%, below the 1.8% consensus, adding to the case for a more accommodative Fed stance.

Gold futures rose 3.4% to $4,170 an ounce, tracking silver's advance. The 10-year Treasury yield slipped below 4.67% from above 4.68% the prior session, reducing the opportunity cost of holding non-yielding assets. Silver's industrial demand outlook also benefited from the data, as lower rates typically support manufacturing activity. The gold-to-silver ratio narrowed to 131, from 135 a week earlier, reflecting silver's outperformance.

The Fed held its benchmark rate in the 3.50%-3.75% range at its July meeting, with three of 12 FOMC members dissenting in favor of a 25-basis-point hike. Markets now price a 63% probability of a rate increase at the September meeting, down from 82% a week ago, according to CME FedWatch data. The next catalyst for precious metals is the August consumer price index release, scheduled for Sept. 13.

This article is for informational purposes only and does not constitute investment advice.