Spot silver prices rose for the second consecutive day, trading around $66.60 per ounce in Asian trading on Friday (September 18), up about 2%. Non-interest-bearing silver received support as falling oil prices helped ease inflation concerns, thereby lowering government bond yields. As a non-interest-bearing asset, silver becomes more attractive relative to interest-bearing assets when yields fall, which is the core logic behind this rise.

Oil Prices and Yields: Saudi Pipeline Progress and Diplomatic Developments Depress Oil Prices and Yields

Crude oil prices fell on news that Saudi Arabia is working to restore flow through its east-west oil pipeline, while market focus shifted to the upcoming meeting between US President Trump and Gulf leaders. Meanwhile, US Treasury yields retreated from recent multi-year highs, with the benchmark 10-year yield falling to around 4.93% after briefly breaking above 5.0% earlier this week. A report from prominent institutional strategists stated that the bond market "received support from falling oil and gas prices at the open this morning" due to news that the US plans to resume negotiations with Gulf states on Iran next week. They noted that "sellers initially rushed in after last night's hawkish Fed rate hike," and that "the 10-year Treasury yield fell to 4.93% as risk assets retreated after the dot plot and neutral rate revisions, before recovering to 5.02% during the Asian session."

Federal Reserve: Warsh hawkish signals raise October rate hike pricing to 53.1%

Investors continued to assess the path of monetary policy following the Federal Reserve's first rate hike in over three years. Fed Chairman Warsh signaled a hawkish stance, stating that inflation had persisted at high levels for too long and emphasizing that recent summer economic data failed to demonstrate meaningful structural improvement. Following his remarks, market expectations shifted, with traders now pricing in a 53.1% probability of another rate hike at the Fed's October meeting, up from 44% the previous day. This hawkish pricing put potential pressure on silver, but falling oil prices and declining yields provided temporary offsetting support.

Institutional Views

Bank of America forecasts an average silver price of $60/oz in Q3, $55/oz in Q4, and an average of approximately $68/oz for the full year of 2026, before rebounding to $70/oz in 2027. The bank notes that the Fed's interest rate hikes and rising real interest rates are putting pressure on silver, while industrial demand, though 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 14:04 Beijing time, spot silver was trading at $66.60 per ounce.