Silver (XAG/USD) retreated on Tuesday, trading around $60.75, down 0.38% on the day, as a sharp rise in US Treasury yields and a stronger US Dollar pressured the metal [1]. The benchmark 10-year US Treasury yield climbed to 5.28%, its highest level since 2007, driven by concerns that elevated energy prices—fueled by persistent tensions around the Strait of Hormuz—could keep US inflation high and force the Federal Reserve to maintain a restrictive monetary policy stance [1].
Geopolitical developments added to market uncertainty. Iranian Foreign Minister Abbas Araghchi stated that Tehran held indirect talks with the US through Qatari mediators in New York and is awaiting a formal response from Washington regarding the reopening of the Strait of Hormuz [1]. However, US President Donald Trump denied offering Iran sanctions relief or access to frozen funds, emphasizing that Washington has offered Tehran “nothing” to end the conflict. The lack of progress leaves the risk of prolonged disruptions in the Strait, potentially keeping energy prices and inflation expectations elevated [1].
Market expectations for further Federal Reserve rate hikes remain strong, with the CME FedWatch tool indicating a 70% chance of another rate hike at the October meeting, following a 25-basis-point increase earlier in September [1]. The US Dollar Index (DXY) traded around 101.50, near its highest levels in two months, supported by these expectations and elevated Treasury yields, creating an unfavorable environment for non-interest-bearing assets like silver [1].
Despite these pressures, US economic data released on Tuesday was weaker than expected. The Conference Board Consumer Confidence Index fell to 81.9 in September, below the 89 expected, and JOLTS Job Openings declined to 7.079 million in August, missing the 7.23 million forecast [1]. Fed Governor Michael Barr commented that monetary policy needs to be “recalibrated” and further adjustments are likely, though he noted the labor market remains solid and expects economic growth to pick up after GDP expanded by around 2% in the first half of the year [1].
CONCLUSION
Silver prices declined amid rising US yields and a stronger Dollar, as geopolitical tensions and inflation concerns fueled expectations for further Fed rate hikes. Weak US economic data did little to offset the bearish sentiment for silver. The market remains focused on upcoming Fed decisions and ongoing developments in the Strait of Hormuz.