• Strong US manufacturing PMI data and rising Treasury yields are placing heavy downward pressure on Silver.
• Odds of an October Fed rate hike jumped to 69.7%, driven by hawkish official commentary and inflation concerns.
• Rising crude oil prices and Middle East geopolitical tensions further reinforce expectations for prolonged monetary tightening.

Silver price (XAG/USD) extends its losses for the second successive day, trading around $64.10 per troy ounce during the Asian hours on Thursday. Silver faces increased downward pressure as both the US Dollar (USD) and US Treasury yields surge, driven by hawkish Federal Reserve (Fed) expectations and resilient domestic economic indicators.

The latest Flash US S&P Global PMI data for September highlighted this momentum, showing manufacturing expanding faster than expected at 52.0 and helping offset slight pullbacks in services and composite activity. Following these economic signals, market expectations for a 25-basis-point Fed rate hike in October surged to nearly 69.7%, up sharply from 48.7% last week.

Traders are now turning their attention to the upcoming US weekly Initial Jobless Claims report, while several Fed officials have reiterated support for the recent rate increase and issued fresh warnings regarding persistent inflation risks.

Fed’s Barr flags need for more hikes, underpinning Dollar support

Fed’s Barr delivers a distinctly hawkish tone, with the FXS Speechtracker score at 8/10, above the 7/10 historical average and signaling a stronger-than-usual tightening bias. The emphasis that “further rate hikes [are] likely needed” and that risks to achieving 2% inflation have increased, while labor market risks have receded, underscores a clear prioritization of inflation control over growth concerns. The admission that the Fed was “out of position” and needed to “recalibrate” policy reinforces the message that the current stance may still be too loose, a backdrop that tends to support the Dollar and weigh on risk assets.

The FXS Fed Sentiment Index rose by 0.42 points to 148.81, firmly in hawkish territory well above the neutral 100 mark, consistent with the elevated FXS Speechtracker reading. This combination of a higher index level and above-baseline speech score confirms a market narrative of persistent Fed tightening risk, which should remain a supportive factor for the Dollar against lower-yielding peers.

Adding to the hawkish interest-rate outlook is a potential rebound in crude oil prices amid lingering uncertainty surrounding United States-Iran diplomatic talks. Speaking at the UN General Assembly, Iranian President Masoud Pezeshkian declared that Tehran would not yield to threats, reaffirming the country’s right to pursue nuclear technology for economic development. He also emphasized that Iran would restrict freedom of navigation through the strategic Strait of Hormuz for as long as US sanctions and blockades remain active. Because higher oil prices exacerbate inflationary pressures, these geopolitical tensions further reinforce expectations for prolonged monetary tightening, maintaining headwinds for Silver.