Silver Rises as Political Shifts & Soft Dollar Lift XAG

Key Moments

Election Outcome and Oil Slide Bolster Silver

Silver prices (XAG/USD) climbed for a second consecutive day, with the metal changing hands around $53.10 per troy ounce in Asian trading on Thursday. The move higher came as Democratic victories in the US midterm elections were seen as improving prospects for peace with Iran, triggering a pronounced decline in oil prices and enhancing silver’s appeal.

The decline in crude prices supported sentiment toward the dollar-denominated, non-yielding metal, as investors reassessed inflation and geopolitical risk following the election outcome.

The white metal also benefited from a softer US Dollar (USD) and lower US Treasury yields, both of which made silver relatively more attractive. President Donald Trump acknowledged that Republicans lost due to the war and cited high gasoline prices as a key factor in the defeat, while signaling no immediate plans to escalate attacks on Iran.

Inflation Outlook vs Fed Hike Expectations

Falling oil prices have the potential to moderate inflationary pressures, which could reduce concerns about aggressive near-term interest rate increases. At the same time, recent US economic data continued to underpin expectations that the Federal Reserve will proceed with another rate hike.

The ADP employment report showed that private-sector hiring increased by 86,000 in October, exceeding expectations of 69,000, even as the prior month’s figure was revised to 86,000 from 90,000. Meanwhile, the ISM Services PMI eased to 54.5 from 54.9, slightly below the consensus forecast of 54.8 but still comfortably within expansionary territory.

These data points kept Federal Reserve policy expectations firmly hawkish. According to the CME FedWatch Tool, market participants were pricing in almost an 82% probability of an additional rate hike in December.

Investors are now focused on upcoming US data releases that may further refine the Fed outlook, including weekly Initial Jobless Claims due Thursday and the Nonfarm Payrolls report scheduled for Friday.

DXY Seen Overvalued Despite Post-Election Retreat

Analysts at Scotiabank maintained the view that, even after the Dollar’s post-election pullback, the broader DXY index remains expensive relative to their valuation metrics. They “continue to highlight the DXY’s premium to our FV estimate based on 2Y spreads, which is closer to 100 (vs. spot in the mid-101s),” underscoring their assessment that the US Dollar is still trading above fair value despite recent weakness across G10 currencies.