Silver Rises as Softer Fed Outlook Lifts Non-Yielding Assets

Key Moments

XAG/USD traded around $57.60 per troy ounce during Asian hours on Monday after recovering from the prior session’s losses.

Safe-haven flows into precious metals increased amid an AI-driven equity selloff, falling bond yields, and stress in AI-related credit markets.

Fed Rate Expectations Support Silver Prices

Silver prices (XAG/USD) moved higher after a weak prior session, with the metal trading around $57.60 per troy ounce during Asian trading on Monday. The advance came as investors scaled back expectations for an interest rate increase by the Federal Reserve in October, lending support to non-yielding assets such as precious metals.

Market attention centered on remarks from Fed Chair Kevin Warsh at an International Monetary Fund event on Friday. Warsh indicated that he does not prejudge interest-rate decisions and did not provide any explicit guidance on whether the Federal Open Market Committee will opt to raise or maintain short-term rates at its upcoming October 27-28 meeting.

Following his comments, interest rate expectations shifted notably. The CME FedWatch Tool showed that traders were assigning nearly an 83.9% chance that the Fed will keep rates on hold later this month, compared with a 49% probability just one month earlier.

Risk-Off Mood and AI Jitters Boost Safe-Haven Demand

In addition to changing Fed expectations, safe-haven demand underpinned silver and other precious metals. Growing concerns around AI-linked investments contributed to a broader selloff across equity markets and pushed bond yields lower, creating a more favorable backdrop for assets perceived as stores of value.

Rabobank highlighted the recent volatility, noting that “AI-related stocks have had a tough few days.” The bank also pointed to emerging strains in related credit markets, commenting that “CoreWeave’s bonds made headlines for not exactly the best reasons” and that, according to the Financial Times, investors are now “dumping data centre bonds” more broadly. These developments underscored how rapidly sentiment has reversed in a theme that had previously attracted significant investor enthusiasm.

Fed Expectations and Market Sentiment Snapshot

Indicator / Event	Detail
Spot silver price (XAG/USD)	Around $57.60 per troy ounce during Asian hours on Monday
Fed October decision probability (CME FedWatch Tool)	Approximately 83.9% chance of no rate change later this month
Fed October probability one month earlier	49% chance of no rate change
Key Fed communication	Fed Chair Kevin Warsh spoke at an IMF event, giving no clear signal on October policy

Silver as an Investment Asset

Silver is a widely traded precious metal that investors use as a store of value and, historically, as a medium of exchange. While it attracts less attention than Gold, market participants may seek exposure to silver to diversify portfolios, benefit from its intrinsic value, or potentially hedge during periods of elevated inflation. Access points include physical holdings such as bars and coins, as well as Exchange Traded Funds that track international silver prices.

Drivers of Silver Price Movements

Multiple factors can influence silver prices. Episodes of geopolitical tension or fears of a severe economic downturn can lift silver due to its role as a safe-haven asset, although typically to a lesser degree than gold. As a yieldless asset, silver tends to react positively when interest rates decline. Price action is also closely linked to the performance of the US Dollar (USD), given that silver is quoted in dollars as XAG/USD. A stronger dollar often restrains silver prices, while dollar weakness can be supportive.

Other important inputs include investment demand, mining output – noting that silver is more plentiful than gold – and recycling activity. Shifts in these fundamental drivers can contribute to both short-term volatility and longer-term price trends.

Industrial Use and Global Demand Dynamics

Beyond its role as an investment asset, silver has extensive industrial applications, particularly in electronics and solar energy, reflecting its very high electrical conductivity, which exceeds that of copper and gold. Robust industrial demand can push prices higher, whereas a slowdown in usage tends to weigh on the market.

Economic activity in major economies such as the United States, China, and India can therefore have a meaningful impact. Industrial sectors in the US and especially China consume silver in various manufacturing processes, while in India, consumer demand for silver jewelry plays an important part in shaping overall demand and price behavior.

Relationship Between Silver and Gold

Silver often mirrors gold’s price direction, given their shared status as safe-haven assets. When gold prices move higher, silver commonly follows. The Gold/Silver ratio – which indicates how many ounces of silver are required to equal the value of one ounce of gold – is frequently used to assess the relative pricing of the two metals.

Some investors interpret a high Gold/Silver ratio as a sign that silver may be undervalued or that gold may be overvalued. Conversely, a low ratio can be taken to mean that gold is undervalued relative to silver.