Silver Under Pressure on Rate Hike Bets

Silver prices traded just below $52 an ounce on Friday as the US dollar strengthened following a stronger-than-expected nonfarm payrolls report, fueling expectations that the Federal Reserve could raise interest rates at its policy meeting next month. The US economy added 165,000 jobs in October, comfortably above market expectations of 65,000, while the unemployment rate unexpectedly eased to 4.1%. Employment figures for the previous two months were also revised upward by a combined 84,000. Further reinforcing the hawkish outlook, average hourly earnings increased by 0.4%, exceeding forecasts of 0.3%, while renewed gains in crude oil prices added to inflationary concerns. Silver was up more than 6% this week supported by broader safe-haven demand following a sweeping Democratic victory in the US midterm elections, which prompted investors to rotate out of AI stocks and seek defensive assets.

Silver fell toward $51 an ounce on Friday but was still on track to gain more than 4% for the week following a sweeping Democratic victory in the US midterm elections. Markets expect Democrats to push for an end to the Iran conflict, which could drive oil prices lower, ease inflationary pressures and reduce the likelihood of more aggressive interest rate hikes. Investors also anticipate that a divided government could constrain President Donald Trump’s fiscal agenda, limiting additional government spending and borrowing while further easing inflation concerns. Meanwhile, the global equity selloff intensified amid fears that Democrats could impose stricter regulations on the artificial intelligence industry and curb data center expansion, prompting some liquidity-driven selling in precious metals. However, these pressures were offset by stronger demand for safe-haven bonds, which pushed yields lower and supported demand for non-yielding assets such as silver.

Silver rose more than 1% to around $53 an ounce on Thursday, extending its post-election rally as the US dollar remained near a one-month low and oil prices stayed below $100 a barrel, easing inflation concerns. The metal surged 5% on Wednesday, benefiting from falling energy prices, lower Treasury yields and easing concerns over inflation and interest rates. The unexpected Democratic takeover of both the House and Senate also weighed on the dollar and bond yields, reducing the likelihood of further deficit-expanding legislation under the Trump administration and potentially limiting the risk of further escalation in the Iran war. Meanwhile, traders are pricing in an approximately 80% probability of a Fed rate hike in December, according to the CME FedWatch Tool. Investors are now awaiting Friday's US nonfarm payrolls report for further clues on the economic outlook and monetary policy.