Silver Rises as Fed Rate Hike Bets Diminish

Silver prices (XAG/USD) surged by 2.3% to near $61.80 during Monday’s European trading session. The rally comes as traders scaled back expectations of aggressive interest rate hikes by the Federal Reserve after weaker-than-expected U.S. labor market data for September. The economy added just 29,000 new jobs, significantly below the estimated 90,000 and the revised prior reading of 133,000. The unemployment rate also rose to 4.2%, higher than the expected 4.1%.

According to the CME FedWatch tool, the likelihood of a Fed rate hike at the upcoming policy meeting has dropped to 19.4% from 70.9% a week ago. This shift in expectations has boosted the appeal of non-yielding assets like silver. However, analysts at Deutsche Bank maintain a different view, arguing that the broader labor market remains resilient despite the disappointing headline figures. They still anticipate two more 25-basis-point rate hikes over the next few quarters.

The U.S. Dollar (USD) has remained firm, supported by rising French fiscal risks, which have increased its safe-haven demand. The U.S. Dollar Index (DXY) climbed 0.3% to near 102.20, reaching a fresh annual high of 102.53 earlier in the day. A stronger dollar typically weighs on silver prices, making them a less attractive investment.

Technically, silver (XAG/USD) is trading at $61.69, maintaining a bearish near-term bias as it remains below the 20-day exponential moving average (EMA) at $63.24. The Relative Strength Index (RSI) at 43.89 suggests subdued bullish momentum. Key resistance levels include the 20-day EMA at $63.24 and the September 9 high at $68.33. On the downside, immediate support is at $60.00, with further downside risk targeting the August 3 low at $56.57.