• Silver may face headwinds as US Treasury yields hover near multi-decade highs.
• Rising crude oil prices stoke inflation fears and solidify expectations for sustained high interest rates.
• Fed minutes signal potential year-end rate hike, dampening investor demand for precious metals.

Silver price (XAG/USD) gains ground after two days of losses, trading around $60.40 per troy ounce during the Asian hours on Thursday. However, non-yielding Silver may face mounting headwinds as US Treasury bond yields hover near their highest levels since 2002, dampening investor demand for precious metals.

Meanwhile, elevated energy prices are stoking broader inflation worries. Oil advanced following reports that the Trump administration directed the Pentagon to prepare strike options against Iran ahead of the midterm elections, while shipping risks in the Strait of Hormuz remain heightened despite Middle East crude flows recovering to prewar levels.

Federal Reserve (Fed) policy expectations continue to anchor broader market sentiment. Minutes from the Fed’s latest meeting showed unanimous support among all 19 policymakers for their September rate increase, with a clear majority agreeing that an additional hike before year-end would likely be appropriate. While investors widely expect the central bank to keep interest rates on hold at its October policy meeting, CME’s FedWatch tool indicates traders are still pricing in roughly a 78% probability of another rate hike in December.

CTAs trim precious metals exposure as liquidation extends

According to TD Securities, trend-following commodity trading advisors are participating in the ongoing precious metals liquidation, with the bank noting that “in the immediate term, however, CTAs are modest sellers of gold and silver, and heavy sellers of platinum on the day.” This positioning underscores a cautious stance across the complex, even as broader macro drivers such as firm real rates and Dollar resilience continue to shape investor interest in gold and silver as hedges against geopolitical and fiscal risks.

Schmid flags AI-driven inflation, keeps Fed firmly hawkish

Fed’s Schmid delivers a notably hawkish tone, with an 8/10 FXS Speechtracker score modestly above the 7.5/10 historical average, underscoring that the labor force “remains in a good place” while inflation is “frustrating” and must be fixed. The emphasis that AI is now one of the largest drivers of inflation, coupled with the warning that the Fed’s credibility is at stake and that “the Fed still has work to do on the short rate despite higher long-term yields,” reinforces a bias toward keeping policy tight and potentially extending restrictive short-rate settings.

The FXS Fed Sentiment Index rises by 0.34 points to 137.91, cementing the Fed’s stance deep in hawkish territory well above the neutral 100 mark. This incremental uptick, aligned with the stronger-than-baseline speech score, signals that markets should continue to price in a firm Fed reaction function to persistent inflation pressures, including those linked to AI-driven cost dynamics.