Spot Silver heads for weekly loss as US Dollar and Treasury yields rise

Key points

Spot Silver extended losses on Friday and was on course for its first weekly decline in four weeks, as the US Dollar strengthened and US Treasury yields rose after the latest US jobless claims data suggested still present labor market tightness. This, in turn, fueled investor rate hike bets.

The number of Americans filing for unemployment assistance dropped by 9,000 to 228,000 during the week ending July 15th, data by the US Labor Department showed.

It has been the lowest number of claims since May and also well below market expectations of 242,000. The data consolidated Federal Reserve officials’ calls for another 25 basis point rate hike at the FOMC meeting next week.

Looking past July, markets are now pricing a 17% chance for a 25 bps hike in September and a 30% chance for a hike in November. Those compared with 12% and 23% chances respectively a day earlier.

In response, the yield on US 2-year Treasury Notes surged to 4.88%, while that on US 10-year Treasuries rose to 3.86%. The 2-year Treasury yield last stood at 4.857%, while the 10-year Treasury yield – at 3.851%.

Higher bond yields translate into a higher opportunity cost of holding non-yielding Silver.

As of 9:50 GMT on Friday Spot Silver was edging down 0.10% to trade at $24.7185 per troy ounce. Yesterday the bright metal retreated 1.60% after going up as high as $25.2690 per troy ounce. The latter has been its strongest price level since May 11th ($25.4775 per troy ounce).

The grey metal was set for a 0.81% weekly loss.

Silver Futures for delivery in September were down 0.06% on the day to trade at $24.948 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.20% to 101.025 on Friday. Earlier in the session, the DXY went up as high as 101.079, which has been its strongest level since July 12th (101.609).