At 12:48 GMT, XAG/USD is trading $31.59, down $0.61 or -1.91%.
Treasury yields are rising while jobs data strengthens the outlook
U.S. Treasury yields rose on Monday, with 10-year Treasury yields rising back above 4%, the highest level since August. Yields on two-year government bonds also rose, rising by more than 6 basis points to 3.99%. The rise in yields follows stronger-than-expected U.S. jobs data on Friday, which showed nonfarm payrolls grew by 254,000 in September, far more than the 150,000 economists had forecast. This robust labor market data has led investors to scale back their expectations of aggressive rate cuts from the Federal Reserve.
As a result, CME Group’s FedWatch tool now shows a 91% probability of a quarter-percentage-point rate cut at the Federal Reserve’s next meeting in November. However, some market analysts, including Ian Lyngen of BMO Capital Markets, suggest the Fed may reconsider the wisdom of a rate cut in November following the positive employment data.
Dollar rises as US economy performs better
The US dollar continued its rally on Monday, buoyed by Friday’s strong labor market report and rising geopolitical concerns in the Middle East. The dollar index, which measures the currency against a basket of peers, hit a seven-week high of 102.69, marking the biggest weekly gain in two years. Analysts now expect the dollar to remain strong in the near term, supported by easing recession concerns and stable economic data.
The stronger dollar, along with higher Treasury yields, limits the upside potential for silver, as both factors make non-yielding assets like precious metals less attractive to investors.
Market forecast
In the short term, silver prices will likely remain under pressure from rising US Treasury yields and a strengthening dollar. However, geopolitical risks and expectations of increased demand from China could provide a floor for prices, preventing a significant decline. Traders should pay attention to key levels, with $30.88 being the crucial support. If silver remains above this level, the uptrend may resume. However, a break below could open the door for a deeper correction towards the 50-day moving average at $29.51.