Silver prices extended their losses during Monday’s late Asian trading session, falling to around $66.50 per ounce, the lowest level in more than two months.
The decline came as investors increased expectations that the US Federal Reserve could tighten monetary policy further following stronger-than-expected US labour market data and persistent inflation concerns.
The white metal remained under significant selling pressure as market participants reassessed the outlook for US interest rates.
According to the CME FedWatch tool, the probability of the Federal Reserve delivering at least one interest rate hike this year rose to 73.8%, compared with 45.2% the previous week.
Higher interest-rate expectations have pushed US Treasury yields higher, reducing the attractiveness of non-yielding assets such as silver.
During early European trading, the benchmark 10-year US Treasury yield climbed to around 4.57%, near a two-week high.
Strong US jobs data fuels hawkish expectations
Investor sentiment shifted after the latest US Nonfarm Payrolls (NFP) report showed stronger-than-expected employment growth.
The report indicated that the US economy added 172,000 jobs in May, well above market estimates of 85,000.
In addition, April’s payroll figure was revised higher to 179,000 from the previously reported 115,000.
The stronger labour market data reinforced expectations that the Federal Reserve may maintain a restrictive monetary policy stance for longer.
A resilient labour market is often viewed as providing policymakers with greater flexibility to keep interest rates elevated if inflation remains above target.
Inflation concerns remain in focus
Inflation concerns have also contributed to the pressure on precious metals markets.
Elevated energy prices linked to the ongoing energy supply crisis have already kept inflation high.
Market concerns intensified further following renewed fears of a broader conflict in the Middle East after Israel and Iran exchanged attacks over the weekend.
Investors are now awaiting the release of the US Consumer Price Index (CPI) data for May, scheduled for Wednesday.
The headline CPI reading is expected to rise 4.2% year-on-year, up from 3.8% recorded in April.
The inflation outlook has become a key factor influencing expectations for future Federal Reserve policy decisions.
Gold declines despite geopolitical risks
Gold also extended its decline on Monday as investors weighed a combination of stronger US economic data, higher Treasury yields, and rising oil prices.
Spot gold fell 0.4% to $4,313.11 per ounce by 0302 GMT, adding to Friday’s nearly 3% decline that pushed prices to their lowest level since March 24.
US gold futures for August delivery declined 0.7% to $4,336.30.
While geopolitical tensions typically support gold through safe-haven demand, investors appeared more focused on the potential inflationary impact of higher energy prices and the possibility of tighter monetary policy.
Markets are currently pricing in a 72% probability of a Federal Reserve rate hike by December, according to CME Group’s FedWatch tool.
Additional pressure came after Cleveland Federal Reserve President Beth Hammack stated on Friday that the labour market appeared close to full employment while inflation remained high enough to keep tighter policy options available.
Oil prices add to inflation fears
The Middle East conflict added another layer of uncertainty to financial markets.
Israel said it had struck military targets in western and central Iran on Monday, despite reports that US President Donald Trump had urged Israeli Prime Minister Benjamin Netanyahu to avoid further attacks.
Oil prices rose by more than $3 per barrel as traders evaluated the potential for a wider regional conflict and possible supply disruptions.
Although higher oil prices can sometimes benefit gold through inflation concerns, the latest increase has instead strengthened expectations that the Federal Reserve may need to maintain or further tighten policy, limiting support for bullion.
Silver technical outlook
From a technical perspective, silver remains under pressure.
XAG/USD was trading around $66.50 at the time of writing, well below its 20-day exponential moving average (EMA) at $74.44.
This suggests that the near-term trend remains bearish.
The Relative Strength Index (RSI) has fallen to 33.62, hovering just above oversold territory.
While this indicates that selling pressure remains dominant, it may also suggest that downside momentum is beginning to moderate.
On the upside, the 20-day EMA at $74.44 represents the first significant resistance level.
A move above that level would be required to ease the current bearish outlook.
On the downside, silver is approaching its near six-month low of $61.01.
A break below that level could expose the metal to further declines towards the $60.00 mark.
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