Silver prices (XAG/USD) continued to decline, falling below $32.00 during Monday’s European session. The white metal’s weakness is attributed to a rise in US bond yields, particularly as the prospect of a substantial 50 basis points (bps) interest rate cut by the Federal Reserve (Fed) in November has diminished.
The yield on the 10-year US Treasury has jumped slightly above 4%, making interest-bearing assets more attractive. This rise in yields reduces the opportunity cost of holding non-yielding investments like silver. Additionally, the US Dollar Index (DXY), which measures the dollar’s strength against a basket of six major currencies, remains steady near 102.50.
Geopolitical Tensions Provide Some Support
Despite the current bearish trend, silver is unlikely to turn extremely negative due to escalating tensions between Iran and Israel. Historically, geopolitical conflicts tend to boost demand for precious metals as safe-haven assets, which may support silver prices in the short term.
Market speculation regarding significant Fed rate cuts has faded following the release of a strong US employment report for September, which highlighted robust labor demand and wage growth. As a result, traders are now pricing in a 25 bps rate cut by the Fed in November, according to the CME FedWatch tool.
Labor Market Data Eases Economic Concerns
The positive labor market data has alleviated fears of an economic slowdown, which had previously fueled expectations for a consecutive 50 bps rate cut in September.
Looking ahead, the next significant influence on silver prices will be the US Consumer Price Index (CPI) data for September, set to be released on Thursday. Economists anticipate that the core CPI, which excludes volatile food and energy prices, will show steady growth of 3.2%. This data could further shape market expectations regarding future Fed policy and, consequently, silver prices.
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