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- Silver stands to rebound strongly due to a less hawkish Fed, lower inflation risks, and depressed oil prices.
- Silver prices rise as a cooling US job market forces Wall Street to rethink interest rates.
- The CME FedWatch tool shows September rate hike odds dropped to 52% from 66% after the release.
XAG/USD gains ground for the fourth consecutive day, trading around $62.60 per troy ounce during the Asian hours on Friday. For non-yielding Silver, a combination of lower inflation risks, depressed oil prices, and a less hawkish Federal Reserve (Fed) creates a highly supportive environment for a sustained rebound.
Silver prices are catching a much-needed bid, shaking off recent pressure as a cooling United States (US) labor market forces Wall Street to aggressively rethink its interest rate outlook. The primary catalyst for this shift was the June Nonfarm Payrolls (NFP) report released on Thursday. The US economy added just 57,000 jobs last month, completely missing the market consensus of 110,000. While the headline unemployment rate managed an unexpected tick downward to 4.2% from May’s 4.3%, the severe hiring slowdown heavily signals a cooling broader economy.
Consequently, traders used the data to scale back their hawkish bets; according to the CME FedWatch tool, financial markets are now pricing in a 52% chance of a September interest rate hike, down sharply from the 66% priced in right before the release.
Recent remarks from Federal Reserve Chair Kevin Warsh at the ECB’s Sintra conference firmly reaffirmed the central bank’s independent commitment to a 2% price stability target; he also acknowledged that inflation risks and expectations have begun to moderate over the past month.
Beyond the macroeconomic factors, Silver is benefiting from an easing inflation environment driven by a collapse in energy costs. Crude oil prices have slid as commercial shipping traffic successfully recovers through the vital Strait of Hormuz waterway. This maritime normalization is a direct result of tangible progress in US-Iran diplomatic talks in Doha, which has significantly lowered the geopolitical risk premium that previously kept energy markets inflated.
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