On Tuesday (October 6) during Asian trading hours, spot silver prices gave back some of the previous day's gains, trading around $60.70 per ounce, continuing to hover near two-month lows. Silver is currently under pressure from both a resilient dollar and soaring US Treasury yields. While weak US jobs data and easing expectations of a Fed rate hike in October provided a temporary buffer, the broader precious metals market remains under pressure.

Silver remains trapped at a two-month low, pressured by both a weak dollar and low yields.

The core contradiction for silver currently lies in the fact that while weak employment data should have been beneficial for precious metals, the resilience of the US dollar and soaring US Treasury yields have overshadowed this support. September's non-farm payrolls increased by only 29,000, far below expectations, and market expectations for a Fed rate hike in October have clearly cooled. According to market pricing, the probability of the Fed keeping rates unchanged at its October meeting is approximately 78%. However, this dovish expectation has not translated into upward momentum for silver, as stronger downward pressure comes from the US dollar and US Treasury yields. The US dollar has received safe-haven buying due to escalating geopolitical tensions in the Middle East. The coordinated Houthi attacks on Saudi targets—including King Khalid International Airport in Riyadh—have disrupted global market sentiment, driving safe-haven flows into the US dollar. For silver, this means the dollar-denominated metal is more expensive for overseas buyers, suppressing demand.

US Treasury yields rose to a 24-year high, with service sector inflation being a key driver.

The movement of US Treasury yields is a key factor suppressing silver prices. Yields on 10-year and 30-year US Treasuries rose to 24-year highs, driven by a combination of continued global bond sell-offs, expanding fiscal risks, and sticky inflation. Recent ISM data showed that US service sector input costs rose at their fastest pace in over four years last month, suggesting that inflationary pressures may persist into 2027. Strategists at HSBC noted that G7 bond yields have risen by about 1% since January, with long-term US Treasuries and UK government bond yields well above 5%. The bank described this movement as a “sharp repricing” in the core interest rate market, pointing to three competing explanations for the trend, laying the groundwork for a broader debate about the drivers of rising real yields and their implications for fixed-income investors.

Geopolitical risks: Houthi attacks provide safe-haven buying for the US dollar.

A new round of escalating geopolitical tensions in the Middle East is a direct catalyst for safe-haven buying of the US dollar. According to Xinhua News Agency, the Houthi rebels in Yemen claimed responsibility on Monday for a series of coordinated attacks on Saudi Arabian targets, using ballistic missiles, cruise missiles, and drones. Houthi spokesman Yahya Saree stated that the attacks hit military bases, an oil facility, and key transportation hubs, including King Khalid International Airport in Riyadh, disrupting air traffic and causing unease in global markets. The implications of this event for silver are complex: geopolitical risks typically favor safe-haven assets, but in the current environment, safe-haven funds are flowing more towards the US dollar than silver. This is because the US dollar benefits from both safe-haven demand and yield advantages, while silver, as a non-interest-bearing asset, lacks appeal in an environment of rising yields.

Market pricing: 78% probability of the Fed holding rates steady, but yields will still dominate.

The market is currently pricing in a 78% probability that the Federal Reserve will keep interest rates unchanged at its October meeting, a significant increase from a week ago. However, even with cooling expectations of a rate hike, yields and the dollar remain strong, indicating that the current pricing power in the precious metals market is not driven by the Fed's short-term policy path, but rather by broader structural pressures—fiscal deficits, bond supply, and inflation stickiness. This distinction is crucial for silver traders. If the rise in yields is primarily driven by fiscal and supply factors, rather than monetary policy expectations, then even if the Fed holds rates steady, silver's upside potential may be limited. Conversely, if yields fall due to weaker economic data, silver could receive more sustained support.

Summarize

Silver is currently under pressure from both a resilient dollar and soaring US Treasury yields. While weak jobs data and a cooling of expectations for a Fed rate hike in October have provided a temporary buffer, the broader precious metals market remains under pressure. The coordinated Houthi attacks on Saudi targets have provided safe-haven buying for the dollar, while US Treasury yields have risen to a 24-year high, and service sector input costs are rising at their fastest pace in over four years, further weighing on silver. The market is pricing in a roughly 78% probability of the Fed holding rates steady, but rising yields and a strong dollar still hold the upper hand. (Spot silver daily chart, source: EasyTrade) At 11:27 Beijing time, spot silver was trading at $60.72 per ounce.