Key Moments
- Silver (XAG/USD) trades around $60.90 per troy ounce after earlier losses, supported by reduced expectations for an October Fed rate hike.
- August US core PCE rose 0.2%, pulling annual headline PCE inflation down to 3.4% versus a 3.7% consensus forecast.
- Elevated US Treasury yields and higher oil prices continue to constrain Silver’s upside despite the softer inflation backdrop.
Spot Silver Steadies as Fed Expectations Reprice
Silver prices (XAG/USD) are recovering after a prior session decline, with the metal trading near $60.90 per troy ounce during Asian hours on Thursday. The non-yielding asset is drawing support as investors scale back expectations for an imminent Federal Reserve rate increase following weaker-than-anticipated US inflation readings released on Wednesday.
Market-based probabilities derived from the CME FedWatch Tool now reflect roughly a 38% chance of a Federal Reserve rate hike in October, down from nearly 51% before the latest personal consumption expenditures (PCE) figures were published. Investors are now turning their attention to Friday’s US Nonfarm Payrolls (NFP) report, where consensus projections point to an increase of 90,000 jobs in September and an unchanged unemployment rate of 4.1%.
Inflation Data Undershoots Forecasts
The shift in expectations around monetary policy has been driven by the latest US PCE price index data. The August PCE index advanced 0.3%, below the 0.4% estimate, while the core PCE measure rose 0.2%, missing the 0.3% consensus forecast.
On a year-over-year basis, headline PCE inflation slowed to 3.4%, significantly below the anticipated 3.7%. This softer inflation profile has eased some pressure on the Federal Reserve to tighten policy further in the near term, providing a tailwind for Silver as a yieldless asset.
Macro Headwinds: Yields, Energy, and Geopolitics
Despite the supportive inflation backdrop, gains in Silver remain constrained by broader market forces. Persistently high oil prices and elevated US Treasury yields are counterbalancing the impact of lower rate-hike odds.
Geopolitical risk is also in focus, with the United States and Iran reportedly making limited progress in negotiations. This comes even as there are indications of improving oil flows from the Middle East. Market participants remain wary about the sustainability of this supply recovery without a formal agreement to resolve the conflict, particularly as both Washington and Tehran assert authority over a key strategic waterway.
US Treasury yields have pushed to multi-decade highs, underscored by concerns that energy-driven price pressures could keep inflation elevated and sustain a tighter monetary stance. The 10-year Treasury yield is hovering around 5.298%, while the 30-year yield was last reported up nearly 4 basis points at 5.633%.
| Indicator | Latest Reading | Market Expectation |
|---|---|---|
| August PCE (monthly) | 0.3% | 0.4% |
| August core PCE (monthly) | 0.2% | 0.3% |
| Annual headline PCE inflation | 3.4% | 3.7% |
| October Fed hike probability (post-PCE) | ~38% | ~51% (pre-PCE) |
| US 10-year Treasury yield | 5.298% | – |
| US 30-year Treasury yield | 5.633% (up nearly 4 bps) | – |
TD Securities: Underlying Fed Bias Still Hawkish
TD Securities characterizes the latest US PCE and GDP revisions as “a mixed bag,” noting they combine “hawkish backward adjustments to growth and dovish adjustments to inflation.” The firm emphasizes that “the underlying trend is the key story,” highlighting “robust growth with rising inflation risks” that are expected to “continue to dominate the Fed’s outlook.”
Within this framework, TD Securities states, “we still expect the Fed to lift rates in October, but can’t discard a more gradual approach,” and concludes that the revisions have not materially altered its view on the Federal Reserve’s policy trajectory.
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