Silver Rises as Oil Prices and Bond Yields Retreat

Silver rose above $60 an ounce on Friday, rebounding from two-month lows as falling oil prices and bond yields eased pressure on non-yielding metals. Oil prices declined after President Donald Trump said the US was engaged in “productive discussions” with Iran and would refrain from attacking the country before the midterm elections. His remarks came even as Iran intensified attacks on tankers transiting the Strait of Hormuz this week, while a hurricane disrupted offshore oil production in the Gulf of Mexico. Meanwhile, US Treasury yields retreated from 24-year highs following strong demand at a 30-year bond auction, indicating that investors remained willing to buy long-dated government debt despite the recent selloff. On the monetary policy front, markets are pricing in roughly an 82% chance that the Federal Reserve will keep interest rates unchanged this month, while the probability of a rate hike in December stands at around 81%.

Silver steadied above $59 an ounce on Friday, but was still on track to finish the week lower as investors assessed developments in the Middle East and the outlook for Federal Reserve monetary policy. Oil prices eased after President Donald Trump said the US was engaged in “productive discussions” with Iran and would refrain from attacking the country before the midterm elections. His comments came even as Iran intensified attacks on tankers passing through the Strait of Hormuz this week. A hurricane also disrupted US offshore oil production in the Gulf of Mexico. Meanwhile, markets are currently pricing in an approximately 82% probability that the Fed will keep interest rates unchanged this month, while the odds of a rate hike in December stand at around 81%. On Thursday, St. Louis Fed President Alberto Musalem indicated that rates may need to rise over the next six to nine months to bring inflation back toward the central bank’s 2% target.

Silver prices fell toward $59 an ounce on Thursday, reaching their lowest level since early August, as investors weighed the Federal Reserve’s September meeting minutes for clues on the path for interest rates. The dollar remained near an 18-month high, while US Treasury yields hovered close to their highest levels in more than two decades after the minutes showed that all 19 policymakers supported September’s rate increase, with most favoring another hike before year-end. Markets now see a nearly 17% chance of an October hike and more than an 85% probability of a December increase, according to the CME FedWatch Tool. Meanwhile, geopolitical tensions offered some support to safe-haven demand, with the number of vessels transiting the Strait of Hormuz falling to its lowest level in more than two months as fighting in the region intensified, according to shipping data.