Silver Rebounds from Two-Month Low as Dollar Weakens

Silver prices surged more than 2% to around $60.5 an ounce on Friday, recovering from a two-month low as a softer US dollar and easing oil prices supported the metal, despite lingering concerns over further Federal Reserve rate hikes. Oil prices retreated after a recent rally, following US President Donald Trump’s statement that Washington would not attack Iran before next month’s US midterm elections, as diplomatic efforts to end the conflict continued. Meanwhile, St. Louis Fed President Alberto Musalem said on Thursday that further monetary tightening may be necessary to bring inflation back to the central bank’s 2% target, although he declined to indicate how policymakers should act at their meeting later this month. According to the CME FedWatch Tool, markets were pricing in less than a 20% probability of a rate hike in October, while assigning more than an 80% chance of at least one 25-basis-point increase by December.

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.