Silver rebounds as Fed rate hike expectations cap gains before US labor data

Silver (XAG/USD) rebounds on Tuesday and trades around $58.80, up 0.96% at the time of writing, after finding support near $56.60 earlier in the day. Despite the recovery, the white metal continues to trade in an unfavorable fundamental environment as markets maintain expectations that the Federal Reserve's (Fed) next policy move will be another interest rate hike.

According to the CME FedWatch tool, investors now see nearly an 80% chance that the Fed will deliver at least one additional rate hike before the end of the year. Higher interest rates increase the opportunity cost of holding non-yielding assets such as Silver, continuing to weigh on investor demand for precious metals.

Market attention is now turning to the United States (US) Job Openings and Labor Turnover Survey (JOLTS) data for May, due at 14:00 GMT. Economists expect employers to have posted 7.3M job openings, down from 7.618M in April. A sharper-than-expected slowdown in the labor market could temper expectations for further monetary tightening, while a stronger reading would reinforce bets on additional rate hikes.

Beyond the JOLTS report, the key event of the week will be Thursday's US Nonfarm Payrolls (NFP) report for June. Investors will closely monitor labor market data after Fed Chair Kevin Warsh stated that the central bank's forward guidance is no longer well-suited to the current monetary policy environment.