Silver (XAG) Forecast: Bearish Sentiment Builds on Strong Jobs Data, Fed Rate Outlook

Silver Slips as Strong U.S. Jobs Data Spurs Rate Hike Concerns

Silver prices declined on Friday following the release of a stronger-than-expected U.S. Non-Farm Payrolls (NFP) report, which fueled concerns about prolonged high interest rates.

The September jobs data showed that 254,000 jobs were added, far exceeding the Dow Jones estimate of 150,000. This unexpected economic strength has increased expectations that the Federal Reserve will keep interest rates elevated longer than previously anticipated.

At 13:02 GMT, XAG/USD is trading $31.73, down $0.30 or -0.93%.

Impact on Silver Prices

The robust NFP report triggered a surge in U.S. Treasury yields and the U.S. dollar, which pressured silver prices. Since silver is priced in dollars, a stronger dollar makes the metal more expensive for overseas buyers, limiting demand.

The benchmark 10-year Treasury yield rose by over 11 basis points to 3.967%, while the 2-year yield climbed by 15 basis points to 3.87%. Higher yields reflect the market’s adjustment to a stronger economy, which implies fewer or smaller interest rate cuts in the near term.

Technically, silver faces stiff resistance at last week’s 12-year high of $32.72. A breakout above this level, backed by strong trading volumes, would indicate a continuation of the current uptrend, with potential upside targets around $34.35, a multi-year high.

On the downside, support is at $31.21, and a break below $30.88 would signal a shift in trend. This could lead to further declines towards $30.21, $29.59, and the 50-day moving average at $29.42.

Fed Policy Outlook After Strong Jobs Report

The stronger-than-expected payroll numbers have reignited speculation about the Federal Reserve’s next move. Following the report, the CME Group’s FedWatch tool showed traders pricing in an 89.5% probability of a 25-basis-point rate cut at the Fed’s November meeting, down from prior expectations of a 50-basis-point cut.

Federal Reserve Chair Jerome Powell has previously stated that future rate cuts will depend on the strength of the labor market and inflation. The strong job growth in September strengthens the case for smaller rate cuts, as the Fed continues its efforts to balance supporting the economy while taming inflation.

Market Forecast

Given the stronger U.S. dollar and rising Treasury yields, silver faces downside pressure in the near term.

Unless silver breaks through key resistance at $32.72, the market could see further declines. Support levels around $30.88 and lower will be critical in determining the metal’s next move.

Investors should monitor upcoming Fed meetings closely, as rate decisions will heavily influence silver’s direction heading into the year-end. Traders should remain cautious, as any deviation from the expected smaller rate cuts could spark further volatility in the silver market.