Silver Price Forecast: XAG/USD Dips Toward $64.00 as Fed Rate Hike Odds Rise

During Thursday's Asian trading session, the silver price extended its decline, currently trading near $64.52 per ounce, after two consecutive sessions of softening amid renewed expectations of hawkish Federal Reserve policy. The simultaneous surge in the U.S. dollar index and U.S. Treasury yields has become the primary factor weighing on this non-yielding precious metal.

**Hawkish Expectations and Strong Data Double Down**

Recent U.S. business activity data showed that the September purchasing managers' index accelerated its expansion, hitting the fastest pace in over five years, underscoring economic resilience. Meanwhile, comments from officials such as Richmond Fed President Barkin have reinforced market expectations for higher interest rates and further rate hikes. According to the CME FedWatch tool, the market now prices in a near-60% probability of a Fed rate hike in October. This tightening outlook has directly pushed the dollar to a near two-month high, exerting heavy pressure on silver prices.

**Elevated Yields Undermine Silver's Appeal**

The Fed's hawkish stance has provided support for U.S. Treasury yields. Although the 10-year Treasury yield has edged lower to around 5% at press time, it remains hovering near recent 19-year highs. For investors holding silver, an non-interest-bearing asset, the rise in bond yields has significantly increased the opportunity cost, thereby diminishing silver's attractiveness. Against this backdrop, silver's technical outlook also leans bearish, with prices continuing to trade below the 20-day exponential moving average, while the relative strength index suggests weakening momentum.

**Geopolitical Risks Fail to Provide Effective Support**

Despite geopolitical tensions, such as U.S. President Trump's threats of further action against Iran, which are typically seen as bullish factors for silver as a safe-haven asset, their supportive effect remains limited under the current dominance of a strong dollar and rate expectations. Market attention remains focused on central bank policy paths, and any signals regarding inflation outlooks or rate changes could trigger sharp volatility in silver prices.