Silver fell sharply on Tuesday, dropping 3 per cent to about $51.70 an ounce after United States inflation came in hotter than economists had expected, strengthening bets that the Federal Reserve will raise interest rates again in December.

Spot silver was trading near $51.70, down $1.60 on the day, according to Kitco News, wiping out the gains it had made during Monday's broad market rally. Gold fell alongside it, with spot gold near $4,055.30 an ounce, down $84.10, or 2.03 per cent. BullionVault reported that gold touched as low as $4,033 after the data was released, while silver slipped back below $52.

Hot inflation data lifts rate-hike bets

The US Bureau of Labor Statistics said consumer prices rose 0.4 per cent in October from the previous month, above the 0.3 per cent rise economists had forecast, although slower than September's 0.6 per cent increase. Core prices, which strip out food and energy, rose 0.3 per cent, also above the 0.2 per cent forecast, and have now increased by 0.3 per cent in each of the past three months.

The report showed shelter costs up 0.3 per cent, accounting for more than 30 per cent of the monthly rise in headline prices. Food prices rose 0.5 per cent and the energy index advanced 0.7 per cent, with petrol prices up 1.0 per cent.

No annual inflation rates were published with the October report, because the federal government shutdown last year prevented the collection of comparable price data in October 2025. September's annual headline rate was 3.7 per cent.

The figures landed hours after Federal Reserve Governor Christopher Waller said in London that a half-point rate rise in December should be considered if core inflation came in at around 0.3 per cent, which is what the data showed. Before the release, futures markets put the chance of a quarter-point rise at the Fed's 8-9 December meeting at about 84 per cent; afterwards, a quarter-point move was almost fully priced in, with some probability also assigned to a larger rise.

Yields climb as dollar firms

The benchmark 10-year US Treasury yield climbed towards 4.94 per cent, while the two-year yield advanced towards 4.69 per cent, Kitco reported. Higher yields and a firmer dollar weighed on precious metals by raising the opportunity cost of holding bullion, which pays no interest.

Silver faces extra pressure because it is also an industrial metal, so it is more sensitive than gold to the outlook for manufacturing and wider financial conditions. Platinum and palladium held up better than gold and silver in London trading, according to BullionVault.

The inflation figures followed a stronger-than-expected October jobs report on Friday, which showed employers adding 165,000 jobs, against expectations of about 65,000, while unemployment eased to 4.1 per cent from 4.2 per cent.

What traders watch next

Attention now turns to Friday's October producer price index, the next major US inflation release, and to Thursday's weekly jobless claims and October existing home sales. Traders will also watch Tuesday's $42 billion auction of 10-year Treasury notes for evidence of demand at higher yields. US Treasury markets are closed on Wednesday for Veterans Day, although US stock markets remain open.

For silver, the immediate question is whether the metal can hold above $51.27, the next downside level identified by Kitco's technical analysts, or whether the stronger dollar and higher yields push it towards $50. A softer producer price report or calmer comments from Fed officials could offer some relief, but for now the hotter inflation data has put the December rate decision firmly back at the centre of the market.