On Monday (September 14) during the European session, spot silver prices gave back the gains of the previous trading day, currently trading around $63.30 per ounce. Silver, a non-interest-bearing asset, is facing significant headwinds, primarily driven by rising expectations of a rate hike at the Federal Reserve's September meeting. Stronger-than-expected US August CPI data and the CME FedWatch tool showing a jump in the probability of a September rate hike from 59% last week to 87%; meanwhile, escalating tensions in the Middle East and the closure of Saudi pipelines have pushed oil prices near four-month highs, creating an inflationary impact on the global economy.

Silver prices are under pressure as expectations of a Fed rate hike intensify.

Data from the U.S. Bureau of Labor Statistics showed that the CPI rose 0.4% month-on-month in August, pushing the 12-month increase to 3.4%. Meanwhile, core CPI rose 0.3% month-on-month, exceeding both the previous reading and the expected 0.2%. These data reinforced market expectations for a near-term interest rate hike. The CME FedWatch Tool showed that financial markets have priced in an 87% probability of a 25 basis point rate hike at the next meeting, a significant increase from 59% last week. Stronger-than-expected inflation figures directly pushed up real interest rate expectations, putting significant pressure on silver, a non-interest-bearing asset. Silver possesses both precious metal and industrial attributes and is highly sensitive to interest rates. The rapidly increasing probability of a rate hike has led to a stronger dollar and higher holding costs, prompting investors to reduce their holdings of non-interest-bearing assets. Market concerns that if the Fed implements a rate hike and signals further tightening, it will further suppress silver's short-term performance. At the same time, while industrial demand provides some support, the recent volatility in silver has intensified under the dominance of the macro interest rate environment, with prices under significant pressure. Traders need to pay attention to the wording of the Fed's decision this week to determine the nature of the rate hike and its medium-term impact on precious metals.

The Middle East crisis and high oil prices exacerbate the pressure.

In addition to monetary policy pressures, silver is also under pressure from the ongoing Middle East crisis—with oil prices remaining high, posing an inflationary shock to the global economy. Crude oil prices surged to near a four-month high after a drone attack forced Saudi Arabia to shut down a major oil pipeline. This disruption to oil supply severely impacted a key shipping route traditionally used to bypass the Strait of Hormuz. As a precaution, operations of the Saudi East-West Pipeline were immediately suspended after the attack, and officials have not yet indicated when normal operations will resume. Analysts from a prominent institution noted, "Oil prices rose again after the drone attack that led to the closure of the Saudi East-West Pipeline and the Houthi rebellion's seizure of strategic locations along the Red Sea coast." They pointed out that this new energy shock has already spilled over into the interest rate market—"Bond yields surged over the weekend due to rising concerns about oil prices, inflation (and debt)"—and is affecting broader risk sentiment, as "Asian stock indices and US stock index futures generally fell today."

Institutional Views

ING lowered its average silver price forecast for the third quarter to $68/oz and for the fourth quarter to $74/oz. The main headwinds are rising bond yields and uncertainty surrounding Federal Reserve policy, which are suppressing the performance of non-interest-bearing assets. The bank believes that improvements on the supply side and a slowdown in some industrial demand will limit upside potential, but silver prices still have the potential to rebound if interest rates peak or safe-haven demand recovers. Bank of America forecasts an average silver price of $60/oz in the third quarter, $55/oz in the fourth quarter, and an average of approximately $68/oz for the whole of 2026, rising to $70/oz in 2027. The bank points out that rising expectations of Fed rate hikes and rising real interest rates are putting pressure on silver, while industrial demand, although providing some support, is insufficient to offset macroeconomic headwinds. Bank of America expects prices to initially be under pressure before gradually recovering, and remains optimistic about long-term demand related to green energy driving a recovery in silver prices. (Spot silver daily chart, source: EasyTrade) At 16:02 Beijing time, spot silver was trading at $63.27 per ounce.