Silver prices fell toward $64 per ounce on Wednesday, touching their lowest levels since December 2025 as investors assessed fresh U.S. inflation data. The decline came after headline inflation climbed to 4.2% in May, marking its highest reading since April 2023, largely meeting market expectations and reducing the likelihood of near-term monetary easing. Renewed military exchanges between the United States and Iran added another layer of uncertainty to global markets, though traders focused more heavily on interest rate expectations and inflation trends despite silver's traditional safe-haven role.
U.S. Inflation Reaches 4.2% in May
Headline inflation climbed to 4.2% in May, marking its highest reading since April 2023. According to the Bureau of Labor Statistics, the increase was driven primarily by rising energy costs linked to ongoing conflict involving Iran. Energy prices increased 3.9% during May after rising 3.8% in April, accounting for more than 60% of the overall monthly increase in consumer prices.
Core inflation, which excludes food and energy, rose to 2.9%, reaching its highest level in seven months. The data reinforced concerns that inflation remains above policymakers' comfort levels despite signs of slowing wage growth.
Real Earnings Decline for Second Consecutive Month
Inflation exceeded wage growth for a second consecutive month. Average hourly earnings increased at a 3.4% annual pace in the latest jobs report, trailing the 4.2% inflation rate. The Bureau of Labor Statistics reported that real average weekly earnings declined 0.2% during May and fell 0.7% from a year earlier, marking the largest annual decline in real earnings since February 2023.
Consumers continue losing purchasing power as households face elevated costs across essential spending categories, including fuel, electricity, food, and healthcare.
Fed Rate Expectations Reduce Silver Demand
The inflation report prompted traders to slightly reduce expectations for policy easing later this year. Markets continue pricing in a quarter-point rate increase by December following stronger-than-expected employment data released last week.
Silver does not generate income, and higher interest rates often increase the appeal of yield-bearing assets such as bonds, reducing demand for precious metals. Expectations that rates could remain elevated for longer contributed to the metal's decline.
U.S.-Iran Military Exchanges Continue
The United States and Iran exchanged fresh strikes as negotiations aimed at ending months of conflict struggled to produce a breakthrough. President Donald Trump stated that Iran would "have to pay the price" for delaying an agreement. In a social media post, Trump accused Iran of prolonging negotiations and warned of consequences if a deal remains out of reach. He later suggested that new strikes targeting Iranian infrastructure could be ordered if Tehran refuses to sign an agreement.
Reports indicated that Qatari negotiators traveled to Tehran in an effort to keep diplomatic discussions alive.
Silver Faces Conflicting Market Forces
Silver now finds itself caught between conflicting market forces. Persistent inflation and geopolitical uncertainty typically support demand for precious metals, while higher interest rate expectations and a stronger outlook for U.S. monetary policy continue to create headwinds.
Silver's slide toward $64.5 per ounce reflects a market focused on inflation, interest rates, and growing uncertainty surrounding the future of U.S.-Iran negotiations.
FAQ
What caused silver prices to fall on Wednesday?
Silver prices fell toward $64 per ounce on Wednesday after U.S. inflation data showed headline inflation climbed to 4.2% in May, largely meeting market expectations and reducing the likelihood of near-term monetary easing. The decline also reflected traders' focus on interest rate expectations rather than geopolitical tensions.
How did May inflation data compare to previous periods?
Headline inflation reached 4.2% in May, marking its highest reading since April 2023. Core inflation rose to 2.9%, reaching its highest level in seven months. Energy prices increased 3.9% during May, accounting for more than 60% of the overall monthly increase in consumer prices.
Why does higher inflation reduce demand for silver?
Higher inflation prompted markets to price in a quarter-point rate increase by December. Silver does not generate income, and higher interest rates increase the appeal of yield-bearing assets such as bonds, reducing demand for precious metals like silver.
