Silver (XAG/USD) rebounded after previous losses, trading around $60.90 per troy ounce during Asian hours on Thursday, supported by easing expectations for further Federal Reserve rate hikes following softer-than-expected US inflation data released on Wednesday [1]. The CME FedWatch Tool shows that markets now price in roughly a 38% chance of a Fed rate hike in October, down from nearly 51% prior to the PCE release [1]. The August US PCE price index rose 0.3%, below the 0.4% forecast, while core PCE increased 0.2%, missing the 0.3% consensus estimate. On an annual basis, headline PCE inflation decelerated to 3.4%, well below the expected 3.7% [1].
Attention is now turning to Friday’s US Nonfarm Payrolls (NFP) report, with consensus forecasts expecting 90,000 jobs added in September and the unemployment rate remaining steady at 4.1% [1]. Despite the support from lower rate-hike odds, further gains for silver could be limited by broader market headwinds, including elevated oil prices and Treasury yields, which continue to offset the positive sentiment [1]. Treasury yields have climbed to multi-decade highs amid concerns over persistent energy-driven inflation, with the 10-year Treasury yield steady around 5.298% and the 30-year yield last up nearly 4 basis points to 5.633% [1].
Geopolitical uncertainty also persists, as the US and Iran have made little progress in negotiations, despite signs of recovering Middle East oil flows. Markets remain cautious about the durability of this supply recovery without a formal resolution to the conflict, especially with both Washington and Tehran claiming control over the strategic waterway [1].
According to TD Securities, the latest US PCE and GDP revisions were a "mixed bag," with hawkish backward adjustments to growth and dovish adjustments to inflation. The firm expects the Fed to lift rates in October but does not rule out a more gradual approach, emphasizing that robust growth with rising inflation risks will continue to dominate the Fed's outlook [1].
CONCLUSION
Silver prices found support above $61 per ounce as softer US inflation data reduced expectations for an imminent Fed rate hike. However, persistent market headwinds such as high Treasury yields, elevated oil prices, and ongoing geopolitical uncertainty could limit further gains. The market remains focused on upcoming US employment data and the Fed's policy trajectory.