A brief de-escalation of tensions in the Middle East has also restored some of the geopolitical risk premium that previously drove safe-haven demand for silver. Meanwhile, the dollar strengthened on the latest economic data, adding to the headwinds for silver amid increased market caution.
Weak jobs data raises doubts about the Fed’s next move
October’s nonfarm wages report showed a marked slowdown in job creation, with only 12,000 new jobs added, versus Wall Street’s forecast of 100,000. Hurricanes and strikes at Boeing and Textron were cited as factors behind the subdued employment numbers, and while the US unemployment rate held steady at 4.1%, indicating resilience in the labor market, the subdued wage rate has fueled expectations of a rate cut by the Federal Reserve by 25 basis points. points during the November 7 meeting.
Fed watchers expect lower interest rates could give silver a tailwind by reducing the strength of the dollar and lowering Treasury yields, both of which would make non-yielding assets like silver more attractive. Lindsay Rosner of Goldman Sachs noted that while recent data may reflect temporary setbacks, the Fed is likely to view broader economic weakness as a reason to extend the easing cycle and provide potential support to silver if the dollar weakens.
Election uncertainty drives demand for safe havens
With the US presidential election still looming, the close race between Donald Trump and Kamala Harris has raised concerns about a protracted or contentious outcome. Political uncertainty has historically driven demand for safe-haven assets, and a turbulent election outcome could lead to renewed interest in silver as a hedge against market volatility.
However, the recent rally of the dollar complicates the picture. The dollar index rose 0.36% to 104.24 on Friday, reflecting investor concerns about possible election disruptions and the Fed’s upcoming interest rate decision. For silver, the election outcome could have a significant impact on market sentiment, especially as investors seek certainty amid potential policy deadlock or delayed outcomes.