Silver Price Forecast: XAG/USD gains near $61.00 as Fed rate hike odds decline

Silver rallies as disappointing US Nonfarm Payrolls reduce expectations for an October Fed rate hike.
Markets now price a 77.9% probability of steady Fed rates after September payrolls grew by just 29,000.
Escalating geopolitical turmoil in the Middle East provided additional safe-haven support for precious metals.

Silver price (XAG/USD) gains ground after registering losses in the previous day, trading around $61.00 per troy ounce during Asian hours on Friday. Non-yielding Silver gains support as softer-than-expected US employment figures reduced expectations for further interest rate hikes by the Federal Reserve (Fed).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Financial markets now price in nearly a 77.9% chance that the Fed will keep benchmark interest rates steady at its upcoming October policy meeting, up from 74% before the labor report. This shift reflects growing sentiment that a cooling job market will prompt policymakers to hold rates steady.

The repricing in rate expectations follows a disappointing US labor market performance, with Nonfarm Payrolls expanding by only 29,000 positions in September. The print fell well short of Wall Street estimates targeting 90,000 additions and marked a steep slowdown from August’s revised figure of 133,000. Further signaling labor slack, the US unemployment rate rose slightly to 4.2%, even as the labor force participation rate edged upward to 61.8%.

Meanwhile, safe-haven demand remains supported by deteriorating geopolitical conditions in the Middle East as Saudi-backed forces in Yemen launched a major offensive to reclaim territory from Houthi forces. Tensions escalated sharply after the Iran-aligned group seized control of the Bab el-Mandeb strait, a crucial maritime chokepoint between the Red Sea and the Gulf of Aden that provides a vital bypass route for regional crude exports, avoiding the Strait of Hormuz.

US rates seen easing as recent repricing pressure fades

According to TD Securities, the recent backup in yields has been driven by “higher Fed pricing, growth expectations, and oil,” but their rates strategists now believe that “rates should breathe a sigh of relief” as that pressure abates. Set against the backdrop of the post-payrolls bull-steepening in US Treasuries and markets sharply pricing out further near-term Fed hikes, TD’s view underscores a shift toward a more benign rates environment after the latest bout of repricing.

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

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