Silver Drops on Strong Dollar, Yields

Silver strengthened above $57 per ounce on Friday, extending gains from the previous session as the recent selloff in equities drove safe-haven demand for government bonds and precious metals. The shift toward safer investments pushed bond yields sharply lower, easing pressure on non-yielding assets. Investors also weighed heightened geopolitical risks in the Middle East amid escalating hostilities between Saudi Arabia and Iran-backed Houthis in Yemen, while a Singapore-flagged container ship was sunk in the Strait of Hormuz this week by an Iranian projectile. Meanwhile, market participants continued to evaluate the Federal Reserve’s monetary policy outlook, with stronger-than-expected US economic data reinforcing expectations of further interest rate increases. Markets are currently pricing in approximately a 72% probability that the Fed will leave rates unchanged this month, while the likelihood of a rate hike in December has climbed to 92%.

Silver rose nearly 2% to $56.50 an ounce on Thursday, tracking gains across precious metals as a broader flight to safety amid a global equity sell-off and tech rout supported demand for safe-haven assets. Concerns over the sustainability of AI spending in a high-interest-rate environment, a weaker US dollar, and geopolitical tensions in the Middle East and Ukraine also shaped market sentiment. Meanwhile, US producer price data added to signs of mounting inflationary pressures, echoing the CPI report released on Wednesday. Persistent inflation has reinforced expectations that the Fed will keep interest rates elevated for longer, potentially weighing on non-yielding precious metals.

Silver steadied above $56 per ounce on Thursday after a sharp fall in the previous session, as crude oil ended its five-day rally, easing pressure across other markets. A softer dollar and retreating bond yields also provided support to metals. However, expectations of more aggressive Federal Reserve rate hikes continued to weigh on sentiment following hotter-than-expected US inflation data. The US Consumer Price Index rose to 3.7% in September, its highest level in four months and above market forecasts of 3.6%, largely driven by rising energy costs. Federal Reserve Bank of Chicago President Austan Goolsbee described the figures as “discouraging” and cautioned that the rapid expansion of artificial intelligence infrastructure could also be overheating the economy. Meanwhile, San Francisco Fed President Mary Daly indicated that the central bank may need to raise short-term interest rates further, although she saw no immediate need for a rate hike at this month’s meeting.