Silver tumbles below $69 as strong US jobs report boosts the US Dollar

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Silver (XAG/USD) falls on Friday and trades around $68.90 at the time of writing, down 6.74% on the day. The white metal is under heavy selling pressure after a stronger-than-expected US employment report boosted the US Dollar and reinforced expectations of a more restrictive Federal Reserve (Fed).

Silver falls sharply on Friday after US employment figures come in well above expectations.
A stronger US Dollar and rising expectations of tighter monetary policy weigh on precious metals.
Middle East tensions and higher energy prices continue to fuel inflation concerns.

The Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) increased by 172K in May, following an upward revision of April’s figure to 179K. Market expectations were for only 85K new jobs. Meanwhile, the Unemployment Rate remained unchanged at 4.3%, while annual wage growth, as measured by Average Hourly Earnings, slowed to 3.4% from 3.6% previously.

This combination of a resilient labor market and moderating wage pressures supports the US Dollar (USD), as investors adjusted their expectations for monetary policy. According to the CME FedWatch tool, markets now see roughly a 32% chance of a 25-basis-point rate hike by the September meeting, up from only 23% a day earlier, while at least one rate hike by December is now the favorite scenario with a chance of 43%.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, advances after the data release and climbs back toward the 99.80 area. A stronger US Dollar typically reduces the appeal of USD-denominated precious metals for international investors.

Meanwhile, traders continue to monitor geopolitical developments in the Middle East. This environment continues to support some hedging demand for precious metals, although the immediate impact of the employment report is currently dominating market sentiment.

Silver’s correction also comes after a period of strong gains that pushed the metal close to multi-year highs. Profit-taking accelerated following the rebound in the US Dollar, amplifying volatility across the market heading into the end of the week.

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.