Silver Slides as Higher Yields Strengthen Fed Rate-Hike Bets

Silver prices fell more than 2% to below $65 an ounce on Tuesday, their lowest level since August 19, as elevated US Treasury yields pressured the non-yielding metal, while investors await key US labour-market data due later this week. US Treasury yields climbed to their highest level since January 2025 as heightened Middle East tensions fueled inflation concerns and strengthened expectations for a near-term Fed rate hike. Last week, Fed Chair Kevin Warsh said at the Jackson Hole symposium that the central bank would “have work to do” if policymakers were not confident inflation was returning to its 2% target. Markets are currently pricing a 66% probability of a rate hike later this month, according to the CME FedWatch Tool. Attention now turns to the ADP employment report on Wednesday and nonfarm payrolls on Friday for further signals on the Fed’s policy path.

Silver traded around $66.2 an ounce on Tuesday, hovering near two-week lows as rising oil prices and hawkish remarks from Federal Reserve Chair Kevin Warsh strengthened expectations for a US rate hike this month. Oil prices advanced for a second straight session after US forces struck an island in the Strait of Hormuz, while Iran responded with attacks on the UAE and Jordan. Higher energy costs stoked inflation concerns, strengthening the case for a near-term Fed rate increase, which is typically negative for precious metals. Meanwhile, Chair Warsh said the Fed would “have work to do” without clearer evidence that inflation is moving back toward its 2% target. Markets are now pricing in a more than 65% chance of a September hike, up from around 36% before his remarks. Despite the recent decline, silver still gained over 15% in August after the US Treasury announced plans to double liquidity-support buybacks of longer-dated bonds, reviving the so-called debasement trade.

Silver traded around $66.5 an ounce on Monday, near a two-week low, as renewed Middle East tensions fueled inflation concerns while hawkish comments from Federal Reserve Chair Kevin Warsh strengthened expectations for a September rate hike. Silver fell more than 4% on Friday after Warsh warned that the Fed would “have work to do” without clearer evidence that inflation is returning to its 2% target. Markets have since raised the probability of a September rate hike to just above 60%, from around 36% before his remarks, according to the CME FedWatch Tool. Oil prices also jumped on Monday after the US said it had attacked an Iranian island in the Strait of Hormuz, prompting a response from Tehran. Despite the recent pullback, silver remains up around 15% this month after touching an over two-month high last week. The rally was also supported by the US Treasury’s plans to double liquidity-support buybacks of longer-dated bonds, fueling concerns over currency debasement.