Silver (XAG/USD) experienced a sharp decline on Friday, falling 6.74% to trade around $68.90, as a stronger-than-expected US employment report triggered a surge in the US Dollar and reinforced expectations of a more restrictive Federal Reserve policy [1]. The Bureau of Labor Statistics reported that Nonfarm Payrolls (NFP) increased by 172,000 in May, surpassing market expectations of 85,000 and following an upward revision of April’s figure to 179,000 [1]. The Unemployment Rate remained steady at 4.3%, while annual wage growth, as measured by Average Hourly Earnings, slowed to 3.4% from 3.6% [1].
This robust labor market data prompted investors to adjust their monetary policy outlook. According to the CME FedWatch tool, the probability of a 25-basis-point rate hike by the September Federal Reserve meeting rose to approximately 32%, up from 23% the previous day. The likelihood of at least one rate hike by December became the favored scenario, with a 43% chance [1]. The US Dollar Index (DXY) advanced following the data release, climbing toward the 99.80 area, which typically diminishes the appeal of USD-denominated precious metals like silver for international investors [1].
The immediate market reaction was dominated by the employment report, overshadowing ongoing geopolitical developments in the Middle East, which continue to provide some hedging demand for precious metals [1]. Silver’s correction followed a period of strong gains that had brought the metal close to multi-year highs, and profit-taking accelerated after the US Dollar rebounded, amplifying volatility as the week concluded [1].
CONCLUSION
Silver saw a significant sell-off, dropping over 6% as strong US jobs data boosted the US Dollar and heightened expectations for further Federal Reserve tightening. The market now anticipates a greater likelihood of rate hikes later in the year, pressuring precious metals. While geopolitical risks still offer some support, the dominant driver remains the robust US labor market and its implications for monetary policy.