Hot US Inflation Data Reinforces Hawkish Fed Stance

A higher-than-expected US Producer Price Index (PPI) for April, which jumped to 6% annually, intensified inflation concerns and bolstered the US Dollar and Treasury yields. This development pressured non-yielding assets like gold and led to expectations that the Federal Reserve will maintain a restrictive policy, with officials like Boston Fed President Collins not ruling out further rate hikes. The Senate's confirmation of Kevin Warsh as the new Fed Chair amid this inflationary environment was also a key market focus.

Geopolitical Tensions Drive Energy Prices and Policy Concerns

Persistent geopolitical risks in the Middle East, including stalled US-Iran negotiations and supply fears surrounding the Strait of Hormuz, are keeping energy prices elevated. Fed officials acknowledged that a prolonged conflict creates challenging policy choices and that the resulting oil shock is a significant factor in the inflation outlook. The situation has also prompted other central banks, such as the ECB, to consider their policy responses to potential energy-driven inflation.

Silver Outperforms Gold on Strong Asian Demand

While gold prices slipped under pressure from a stronger US dollar and higher yields, silver demonstrated notable strength. Silver's advance was attributed to robust physical demand from Asia, with analysts highlighting renewed interest from Chinese traders and strong premiums on the Shanghai Futures Exchange. In a separate development affecting physical markets, India raised import tariffs on both gold and silver in a move to curb bullion imports.