Key Moments
- XAG/USD trades near $60.60 per troy ounce after more than 5% losses in the prior session.
- Money markets currently assign about a 70% probability to another Federal Reserve rate increase in October.
Silver Extends Declines as Oil and Yields Climb
Silver (XAG/USD) continues to retreat after suffering losses of over 5% in the previous session, with prices hovering around $60.60 per troy ounce during Asian trading on Tuesday. The non-yielding metal remains under pressure as the lack of progress in US-Iran negotiations keeps oil prices elevated, reinforcing concerns about persistent inflation and the prospect of additional tightening by the Federal Reserve.
Uncertainty around the US-Iran nuclear discussions has helped sustain the latest upswing in crude. Iranian officials signaled skepticism over the chances of reaching a deal before the upcoming US midterm elections in November. That stance follows US President Donald Trump’s recent rejection of Tehran’s latest proposal, which has stalled the talks and curtailed earlier diplomatic momentum.
Higher Inflation Fears and Fed Expectations Lift Yields
The renewed advance in oil has intensified worries about inflation and has strengthened expectations that the Fed may need to raise rates further. These dynamics have driven Treasury yields to new multi-year highs, weighing on non-interest-bearing assets such as Silver.
After the central bank delivered its first rate increase in three years earlier this month, market pricing in money markets reflects roughly a 70% likelihood of another hike in October. This backdrop has contributed to the headwinds facing XAG/USD.
Rate Market Positioning Signals Further Tightening
Strategists at Rabobank emphasize that positioning in US rates markets still leans toward additional tightening. The bank notes that “the OIS curve suggests investors are still positioned for more than three hikes by the end of next year.” This indicates that, even after the recent 25bp move from the Fed, investors continue to anticipate a prolonged policy normalization path.
Market participants are now focused on forthcoming US economic releases for further clues on the policy outlook. Attention is turning to the US Personal Consumption Expenditures (PCE) inflation report due on Wednesday and the Nonfarm Payrolls report scheduled for Friday.
Key Macro Drivers at a Glance
| Indicator / Market | Current Context |
|---|---|
| Silver price (XAG/USD) | Trading around $60.60 per troy ounce after more than 5% losses in the prior day |
| Oil prices | Supported by stalled US-Iran talks and doubts over a near-term nuclear deal |
| Treasury yields | At fresh multi-year highs amid inflation concerns and Fed tightening expectations |
| Fed rate expectations | Money markets pricing about a 70% chance of another hike in October; OIS curve implying more than three hikes by end of next year |
| Upcoming US data | PCE inflation report on Wednesday; Nonfarm Payrolls on Friday |
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