Spot silver prices extended their losses for the second consecutive trading day, trading around $64 per ounce in Asian trading on Thursday (September 24). The surge in both the US dollar and US Treasury yields, driven by hawkish expectations from the Federal Reserve and resilient US domestic economic indicators, put further downward pressure on silver, with support around the 50-day moving average at $63.57. This momentum was highlighted by the preliminary reading of the US S&P Global PMI for September, with manufacturing expanding more than expected at 52.0, helping to offset slight declines in services and overall activity. Market expectations for a 25 basis point rate hike by the Federal Reserve in October surged to nearly 69.7%, up from 48.7% last week.

Silver prices came under pressure as US PMI and yields surged.

The preliminary S&P Global PMI for September in the US showed manufacturing expansion at 52.0, higher than expected, helping to offset a slight decline in services and overall activity. This economic signal pushed both the dollar and US Treasury yields higher, putting direct pressure on silver, a non-interest-bearing asset. Traders are now turning their attention to the upcoming weekly US jobless claims report, while several Federal Reserve officials reiterated their support for near-term interest rate hikes and issued new warnings about persistent inflation risks.

Barr's hawkish remarks strengthen support for the US dollar.

Federal Reserve Chairman Barr delivered distinctly hawkish comments. He emphasized that "further rate hikes may be needed," the increased risk of achieving 2% inflation, and that labor market risks have subsided, highlighting a clear priority of prioritizing inflation control over growth concerns. Barr acknowledged that the Fed had previously "mispositioned" and needed to "recalibrate" its policy, reinforcing the message that the current stance may still be too accommodative. This context tends to support the dollar and suppress risk assets.

Potential oil price rebound and geopolitical tensions reinforce expectations of tightening.

Adding to the hawkish interest rate outlook is the potential rebound in oil prices due to ongoing uncertainty in US-Iran diplomatic negotiations. Iranian President Peshizian stated at the UN General Assembly that Tehran would not succumb to threats and reiterated Iran's right to pursue nuclear technology for economic development. He also emphasized that Iran will restrict freedom of navigation in the Strait of Hormuz as long as US sanctions and blockades remain in place. These geopolitical tensions, exacerbating inflationary pressures due to higher oil prices, further strengthen expectations that monetary tightening will continue for a longer period, maintaining headwinds for silver.

Institutional Views

UBS's latest September report provides a phased price target for silver: $70/oz in December 2026, $75 in March and June 2027 respectively, and further to $80 in September 2027. The report points out that silver's current correlation with gold is at a multi-year high, and its price behavior is more like a high-beta reflection of gold. In the short term, the Fed's shift to a more hawkish stance and the possibility of further rate hikes constitute the main headwinds; however, in the medium term, rising gold prices, robust investment demand, and industrial demand are expected to provide support for silver. UBS judges that the risk balance still leans towards a medium-term upside, and its operational strategy is more inclined to build positions in batches during pullbacks rather than chasing short-term rebounds.

Summarize

Silver fell for the second consecutive day to around $64/oz, with the surge in the US dollar and US Treasury yields being the core pressures. Better-than-expected US manufacturing PMI data boosted market expectations for a Fed rate hike in October to 69.7%, and hawkish comments from Barr reinforced the tightening narrative. A potential rebound in oil prices and further geopolitical tensions in the Middle East strengthened expectations that monetary tightening will continue for a longer period, maintaining headwinds for silver. Going forward, attention should be paid to US initial jobless claims, speeches by Fed officials, progress in US-Iran negotiations, and oil price movements. If US data continues to support a hawkish stance, silver may fall further; if data weakens or geopolitical tensions ease, silver may find some respite. Against the backdrop of Fed tightening expectations, silver still faces downward pressure in the short term. (Spot silver daily chart, source: EasyTrade) At 14:44 Beijing time, spot silver was trading at $64.09 per ounce.