Silver Drops as Oil Prices Rebound

Silver dropped below $61 an ounce on Wednesday, reversing gains from the previous session as oil prices rebounded on persistent risks to Middle East supply, keeping inflationary risks and rate hike concerns in focus. Oil prices advanced as Iran intensified attacks on tankers in the Strait of Hormuz in recent days, while Saudi forces continued to clash with the Houthis. Treasury yields also remained near multi-decade highs amid concerns over persistent inflation, rising fiscal risks and elevated AI-related debt issuances. Meanwhile, markets are pricing in nearly an 80% chance that the US Federal Reserve will keep rates unchanged this month following weaker-than-expected job growth in September and downward revisions to payrolls for the prior two months. Investors now await minutes from the Fed’s latest meeting for further clues on the monetary policy outlook.

Silver hovered around $61 an ounce on Tuesday as fading expectations of a Federal Reserve rate hike this month offset pressure from a firm US dollar and elevated Treasury yields. Markets have scaled back expectations for an October rate increase following weaker-than-expected job growth in September and downward revisions to payrolls for the previous two months. Traders now see only about a 20% chance of a rate hike this month, while pricing in nearly a 70% probability of an increase in December, according to the CME FedWatch Tool. Meanwhile, the dollar remained close to an 18-month high, supported by rising government debt, widening budget deficits and political uncertainty across parts of the Eurozone, which have weighed on the euro. Elsewhere, oil prices fell on Tuesday as resilient Middle Eastern crude exports and a G7 emergency stockpile release eased concerns over potential supply disruptions.

Silver held below $61 an ounce on Tuesday, remaining close to two-month lows as a stronger dollar and surging Treasury yields outweighed support from softer US jobs data and reduced expectations for an October rate hike by the Federal Reserve. The dollar strengthened largely as the euro weakened amid rising political uncertainty and fiscal concerns across Europe. Treasury yields also climbed to fresh 24-year highs as the global bond selloff continued, driven by mounting fiscal risks and persistent inflation concerns. ISM data showed that cost pressures in the US services sector increased at the fastest pace in more than four years last month. Meanwhile, markets are pricing in roughly a 78% probability that the Fed will keep interest rates unchanged this month following weaker-than-expected US jobs data. Elsewhere, oil prices declined on signs of increased supply from the Middle East, easing concerns over inflation and higher interest rates.