Silver Shaken by NFP; Fed Pressure Still Looms

Silver prices staged a modest recovery during Friday's trading (Sept 4) after facing sharp downward pressure following the release of US labor market data. XAG/USD is currently trading around US$66.90 per troy ounce, having previously slumped to approximately US$64.74 immediately after the Nonfarm Payrolls (NFP) release. This recovery occurred as the rally in the US Dollar and the surge in Treasury yields began to lose some momentum.

Initial pressure on Silver mounted after the US economy added 162,000 jobs in August, far exceeding market expectations of 56,000. The unemployment rate held steady at 4.1%, while data from the previous month was also revised upward. The report underscored the continued resilience of the US labor market, providing the Federal Reserve with room to maintain a tight monetary policy stance.

The market reaction was initially intense. The US Dollar Index surged following the NFP release before paring gains and settling back around the 99.10 level. Meanwhile, the 10-year US Treasury yield hovered around 4.774% after briefly approaching the 4.8% mark. The combination of a stronger Dollar and higher yields weighed on Silver by increasing the opportunity cost of holding non-yielding assets.

However, Silver's decline was short-lived as the market began to view the labor report more comprehensively. Annual wage growth slowed to 3.1%, while the 0.3% monthly wage increase aligned with forecasts. These figures alleviated some concerns that a strong NFP reading would automatically trigger heightened wage-push inflation, preventing the Dollar and yields from sustaining their post-release spikes.

Despite this, the strong NFP data pushed expectations for a Federal Reserve rate hike at the September meeting up to around 60%. Nevertheless, the decision is not yet set in stone, as Fed officials—including Christopher Waller—have emphasized that August inflation data will be a crucial factor. Consequently, market attention is now shifting to next week's US CPI and PPI data, which could determine whether the Federal Reserve proceeds with an interest rate hike or opts to hold rates steady.

Newsmaker Analysis: Silver's rebound following the post-NFP sell-off suggests the market is not yet fully convinced by a hawkish Fed scenario. With XAG/USD recovering to around US$66.90, the US$67–US$68 zone has emerged as a key short-term resistance level. If Silver breaks through this area while the DXY and yields continue to ease, the recovery momentum could persist. Conversely, if next week's US CPI data comes in hot—pushing yields above the 4.8% mark—Silver risks retesting the US$65 to US$64.70 range. For now, Silver remains caught in a tug-of-war between strong NFP data and easing pressure from the US Dollar and Treasury yields. (arl)

Source: Newsmaker.id