Silver Climbs as Fed Rate Hike Odds Diminish on Weak US Jobs Data

Silver prices (XAG/USD) climbed near $61.00 per troy ounce during Friday's Asian trading session, rebounding from losses the previous day. The rally was driven by softer-than-expected US employment data, which reduced expectations for further interest rate hikes by the Federal Reserve (Fed). Markets now assign a 77.9% probability that the Fed will maintain steady rates at its October meeting, up from 74% before the labor report.

The disappointing US labor market performance, with Nonfarm Payrolls adding only 29,000 jobs in September, far below the estimated 90,000, signaled a cooling job market. The unemployment rate slightly increased to 4.2%, while labor force participation rose to 61.8%. This shift in economic sentiment is prompting policymakers to consider holding rates steady.

Safe-haven demand for silver also received a boost from escalating geopolitical tensions in the Middle East. Saudi-backed forces in Yemen launched a major offensive against Houthi forces, intensifying conflicts after the Iran-aligned group seized control of the Bab el-Mandeb strait. This chokepoint is critical for regional crude oil exports, adding to market uncertainty.

TD Securities noted that recent yield increases were driven by higher Fed pricing, growth expectations, and oil prices. However, their rates strategists believe that pressure on yields should ease as these factors fade. This view aligns with a more favorable rates environment following the latest repricing after the payrolls report.