Silver (XAG/USD) experienced significant volatility on Friday, initially plunging to an intraday low of $64.74 following the release of stronger-than-expected US Nonfarm Payrolls (NFP) data, before rebounding to trade around $66.20, down 1.18% on the day [1]. The US economy added 162,000 jobs in August, surpassing market expectations of a 56,000 increase. Additionally, July's payroll figure was revised to a gain of 21,000 from a previously reported decline of 23,000, and June's growth was revised higher to 31,000 from 20,000. The Unemployment Rate remained unchanged at 4.1%, matching expectations [1].
The robust labor-market data triggered a sharp repricing across financial markets, with the US Dollar Index (DXY) surging to 99.36 and the benchmark 10-year US Treasury yield retesting the 4.81% area. These moves weighed heavily on Silver, as a stronger US Dollar makes the metal more expensive for overseas buyers and higher Treasury yields increase the opportunity cost of holding non-yielding assets [1]. However, both the DXY and Treasury yields subsequently retreated, with the DXY easing toward 99.10 and the 10-year yield moving to 4.77%, allowing XAG/USD to rebound by more than $1 from its intraday low [1].
The employment report also shifted expectations regarding the Federal Reserve's September monetary policy decision. According to the CME FedWatch Tool, markets now assign around a 60% chance to a 25-basis-point interest rate hike at the September 15-16 meeting, up from roughly 50% before the NFP release [1]. The stronger jobs data has increased focus on upcoming US inflation figures, with the Consumer Price Index (CPI) and Producer Price Index (PPI) expected to be decisive for the Fed. Fed Governor Christopher Waller stated that the September decision hinges on August inflation, noting signs of disinflation but warning that hotter-than-expected inflation could prompt consideration of a rate hike [1].
Silver remains caught between renewed expectations of tighter US monetary policy and the fading initial reaction in the US Dollar and Treasury yields. While the strong NFP report keeps pressure on the metal, the retreat in the Greenback and yields has allowed XAG/USD to recover a significant portion of its initial losses [1].
CONCLUSION
Silver's sharp post-NFP decline was driven by strong US jobs data and a surge in the US Dollar and Treasury yields, but the metal rebounded as these moves faded. Market expectations for a Fed rate hike in September have increased, with upcoming inflation data likely to be decisive. Silver remains sensitive to US monetary policy signals and macroeconomic data releases.