Silver Price Forecast: XAG/USD falls to near $64.00 amid rising Fed rate hike odds

Strong US manufacturing PMI data and rising Treasury yields are placing heavy downward pressure on Silver.
Odds of an October Fed rate hike jumped to 69.7%, driven by hawkish official commentary and inflation concerns.
Rising crude oil prices and Middle East geopolitical tensions further reinforce expectations for prolonged monetary tightening.

Silver price (XAG/USD) extends its losses for the second successive day, trading around $64.10 per troy ounce during the Asian hours on Thursday. Silver faces increased downward pressure as both the US Dollar (USD) and US Treasury yields surge, driven by hawkish Federal Reserve (Fed) expectations and resilient domestic economic indicators.

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The latest Flash US S&P Global PMI data for September highlighted this momentum, showing manufacturing expanding faster than expected at 52.0 and helping offset slight pullbacks in services and composite activity. Following these economic signals, market expectations for a 25-basis-point Fed rate hike in October surged to nearly 69.7%, up sharply from 48.7% last week.

Traders are now turning their attention to the upcoming US weekly Initial Jobless Claims report, while several Fed officials have reiterated support for the recent rate increase and issued fresh warnings regarding persistent inflation risks.

Fed’s Barr flags need for more hikes, underpinning Dollar support

Fed’s Barr delivers a distinctly hawkish tone, with the FXS Speechtracker score at 8/10, above the 7/10 historical average and signaling a stronger-than-usual tightening bias. The emphasis that “further rate hikes [are] likely needed” and that risks to achieving 2% inflation have increased, while labor market risks have receded, underscores a clear prioritization of inflation control over growth concerns. The admission that the Fed was “out of position” and needed to “recalibrate” policy reinforces the message that the current stance may still be too loose, a backdrop that tends to support the Dollar and weigh on risk assets.

The FXS Fed Sentiment Index rose by 0.42 points to 148.81, firmly in hawkish territory well above the neutral 100 mark, consistent with the elevated FXS Speechtracker reading. This combination of a higher index level and above-baseline speech score confirms a market narrative of persistent Fed tightening risk, which should remain a supportive factor for the Dollar against lower-yielding peers.

Adding to the hawkish interest-rate outlook is a potential rebound in crude oil prices amid lingering uncertainty surrounding United States-Iran diplomatic talks. Speaking at the UN General Assembly, Iranian President Masoud Pezeshkian declared that Tehran would not yield to threats, reaffirming the country's right to pursue nuclear technology for economic development. He also emphasized that Iran would restrict freedom of navigation through the strategic Strait of Hormuz for as long as US sanctions and blockades remain active. Because higher oil prices exacerbate inflationary pressures, these geopolitical tensions further reinforce expectations for prolonged monetary tightening, maintaining headwinds for Silver.

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

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