XAG/USD trades with caution around $68 as US CPI takes centre stage

Silver price (XAG/USD) trades marginally lower at around $67.90 during the European trading session on Tuesday. The white metal faces slight selling pressure as investors turn cautious ahead of the United States (US) Consumer Price Index (CPI) data for May, which will be published on Wednesday.

The US CPI report is expected to show that the headline inflation accelerated to 4.2% Year-on-Year (YoY) from 3.8% in April. In the same period, the core CPI – which excludes volatile food and energy items – is expected to have grown at an annualized pace of 2.9%, faster than the previous reading of 2.8%.

Month-on-month (MoM) headline and core CPI are estimated to have risen at a moderate pace of 0.5% and 0.3%, respectively.

Investors will pay close attention to the US inflation data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.

Though precious metals outperform in a high inflation environment, an increment in hawkish Fed bets bodes poorly for non-yielding assets, such as Silver.

Hawkish Fed prospects have intensified in the last two trading days, following the release of the surprisingly stronger Nonfarm Payrolls (NFP) data for May.

According to the CME FedWatch tool, there is an almost 71% chance that the Fed will deliver at least one interest rate hike this year.