Silver Price Forecast: XAG/USD slips below $63.50 amid rising Fed rate hike odds

Silver prices (XAG/USD) are slipping below $63.50 as expectations of a Federal Reserve (Fed) rate hike in September rise. According to the CME FedWatch Tool, markets now estimate a greater than 72% chance of a 25-basis-point rate increase next week, up from 61% prior to the recent Producer Price Index (PPI) data release. Investors are also watching the upcoming United States (US) consumer price index report, which could further support these tightening monetary policies.

This downward pressure follows a hotter-than-expected PPI report on Thursday, which showed the headline PPI rose 5.4% year-over-year in August, surpassing analyst forecasts of 5.3%. The surge in oil prices due to the escalating US-Iran conflict is also adding to Silver's woes, sparking broader inflation concerns. Silver, used as a store of value and hedge during high-inflation periods, is a commodity that can be traded through physical means or financial instruments like Exchange Traded Funds.

Its price is influenced by factors like geopolitical instability, interest rates, the US Dollar's performance, investment demand, mining supply, and recycling rates. As a yieldless asset, Silver rises when interest rates are low and falls when rates are high. It's also closely linked to Gold's movements, with their prices often moving in tandem as safe-haven assets. The Gold/Silver ratio may signal whether one metal is undervalued relative to the other.