Silver (XAG/USD) rebounded to trade around $60.40 per troy ounce during Asian hours on Thursday, recovering after two consecutive days of losses [1]. This uptick comes despite US Treasury bond yields hovering near their highest levels since 2002, a development that typically dampens investor demand for non-yielding precious metals like silver [1]. Elevated energy prices are also fueling broader inflation concerns, with oil prices advancing amid reports of the Trump administration directing the Pentagon to prepare strike options against Iran and ongoing shipping risks in the Strait of Hormuz, even as Middle East crude flows have returned to prewar levels [1].
Federal Reserve policy remains a key anchor for market sentiment. The latest Fed meeting minutes revealed unanimous support among all 19 policymakers for the September rate increase, with a clear majority indicating that another hike before year-end would likely be appropriate [1]. While investors expect the Fed to keep rates on hold at the October meeting, CME's FedWatch tool shows traders are pricing in a roughly 78% probability of a rate hike in December [1].
Commodity trading advisors (CTAs) have been trimming their exposure to precious metals, with TD Securities noting that CTAs are modest sellers of gold and silver and heavy sellers of platinum, reflecting a cautious stance amid ongoing liquidation in the sector [1]. Broader macro drivers such as firm real rates and a resilient US dollar continue to shape investor interest in gold and silver as hedges against geopolitical and fiscal risks [1].
Fed’s Schmid delivered a notably hawkish tone, emphasizing that the labor force "remains in a good place" while inflation is "frustrating" and must be addressed [1]. Schmid highlighted AI as a significant new driver of inflation and warned that the Fed's credibility is at stake, suggesting that the central bank may need to keep policy tight and potentially extend restrictive short-rate settings [1]. The FXSFedSentiment Index rose by 0.34 points to 137.91, well above the neutral 100 mark, reinforcing expectations for a firm Fed response to persistent inflation pressures [1].
CONCLUSION
Silver's rebound to $60.40 comes amid a challenging macro backdrop of high bond yields, hawkish Fed policy, and persistent inflation concerns. Market sentiment remains cautious, with CTAs reducing exposure and the Fed signaling a continued commitment to tight policy. Investors should monitor upcoming Fed decisions and inflation trends for further direction.