Silver slides as $79 oil revives rate hike fears, lifts dollar

Silver fell with gold as Brent crude jumped 4% to $79.11 after Iran's Strait of Hormuz closure revived Fed rate hike fears.

"CME FedWatch data shows markets now assign a significantly higher probability of a September rate increase than they did a week ago," according to the exchange's tracking tool.

Spot gold fell more than 1% to around $4,059 per ounce, while silver and other precious metals also declined. The selloff extended across asset classes, with South Korea's Kospi plunging 6% and US Treasury yields rising as traders reduced exposure to risk assets.

The precious metals complex faces headwinds from higher bond yields and a stronger dollar as traders increase bets on another Fed rate increase. Federal Reserve Chair Kevin Warsh's testimony before Congress later this week, along with US CPI and PPI data, will provide the next signals on the rate path.

Oil Surge Reshapes Rate Expectations

Brent crude's jump above $79 marks a sharp rebound from last week's low of around $70, according to exchange data. The move followed Iran's claim that it had closed the Strait of Hormuz after fresh attacks involving the United States and Gulf states, raising concerns over disruptions to one of the world's busiest oil shipping lanes. US West Texas Intermediate crude also climbed more than 4% to $74.37 a barrel. Any prolonged disruption could further tighten global energy supplies and intensify inflationary pressures, complicating the Fed's policy path. Bank of America analysts recently warned that sustained higher energy costs could erode corporate margins and slow economic activity.

Precious Metals Under Dual Pressure

Gold's decline to $4,059 compares with the all-time high above $4,500 set earlier this year, while silver's underperformance relative to gold reflects the additional drag from industrial demand concerns. Higher energy costs feed into broader inflation measures, which could force the Fed to maintain or raise rates — a scenario that historically weighs on precious metals by lifting real yields and the dollar. Spot gold's next support level lies near $4,000, a psychological threshold that, if breached, could accelerate selling. Silver, which has both industrial and monetary demand drivers, faces additional headwinds from the rate-sensitive economic outlook and potential slowdown in manufacturing activity.

The broader commodities complex reflected the risk-off tone, with silver, platinum and palladium all declining. Safe-haven demand for precious metals was overshadowed by the dual pressure of a stronger dollar and rising bond yields, which typically compete with gold and silver for investor capital.

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