Silver (XAG/USD) traded lower near $48.45 during Asian trading on Tuesday, retreating from its 14-year high as renewed strength in the US Dollar (USD) weighed on the USD-denominated metal. The rebound in the Greenback, supported by higher US Treasury yields, made silver more expensive for investors holding other currencies.
US Dollar rebound pressures silver
The US Dollar gained traction to fresh multi-day highs amid rising yields, pressuring precious metals across the board. Higher yields generally make non-interest-bearing assets like silver less attractive. However, persistent global uncertainty and growing expectations of further Federal Reserve (Fed) rate cuts may help limit deeper losses in XAG/USD.
Safe-haven demand supported by geopolitical tensions and US shutdown
Lingering concerns over the ongoing US government shutdown and heightened geopolitical risks have bolstered safe-haven demand for assets such as silver. The shutdown entered its seventh day after US Senators once again failed to pass funding measures to reopen the government.
US President Donald Trump announced on Sunday that his administration would begin laying off federal employees as the standoff drags on. The September employment report, originally scheduled for release last Friday, was postponed due to the shutdown.
Fed rate cut expectations provide partial support
Speculation over additional Fed rate cuts continues to lend some support to silver prices. Lower interest rates typically reduce the opportunity cost of holding non-yielding assets, providing a tailwind for precious metals. Markets are currently pricing in a 95% probability of a 25-basis-point (bps) rate cut in October and an 83% chance of another reduction in December, according to the CME FedWatch Tool.
