Falling US Treasury yields have provided some relief to precious metals, but silver has not mirrored gold’s relatively resilient performance. The yield on the 10-year Treasury bond has fallen to 4.02%, a turnaround from recent highs, which typically provides some upside for non-yielding assets like silver. However, the market’s focus remains on the Federal Reserve’s next policy steps, especially after Fed Governor Adriana Kugler’s comments on the resilient US labor market. This resilience suggests that rate cuts may not happen as quickly as previously expected, limiting silver’s short-term appeal.
The CME FedWatch tool currently shows that investors are pricing in a lower likelihood of a significant rate cut, and expect a more cautious 25 basis point cut at the Fed’s November meeting. This cautious outlook dampens bullish sentiment in the silver market, as higher interest rates tend to strengthen the U.S. dollar, making silver less attractive to investors.
Geopolitical concerns and weak physical demand
While geopolitical tensions, especially in the Middle East, continue to support demand for gold as a safe haven, silver has not experienced the same level of interest among investors. Silver price action remains more vulnerable to physical demand shifts, which have been noticeably weaker, especially in China, the largest consumer of industrial silver. With China’s central bank holding off on increasing its reserves for a fifth month and local prices trading at a discount, global demand for physical silver remains subdued.
Silver market forecast
In the near term, silver could face increased downside risk, especially if it were to break below the key $30.88 level. Failure to stay above this threshold could accelerate selling towards the 50-day moving average at $29.57.