Recently, price fluctuations in the precious metals market have intensified, with the core influencing factor shifting from safe-haven premium to Federal Reserve policy expectations. The Iran-US conflict has pushed up international crude oil prices, and the US non-farm payroll data exceeded market expectations, reinforcing the logic of "rate hike trades". Expectations of a Federal Reserve rate hike in September have heated up, suppressing silver prices. However, internal divisions within the Federal Reserve remain significant. Short-term market focus has shifted to the Federal Reserve's monetary policy, and it is expected that silver prices will continue to fluctuate in a wide range before the September interest rate decision.

If the inflation cooling path continues in the future, there is still room for the Federal Reserve to revise its interest rate hike expectations. Moreover, under the influence of factors such as massive debt and the midterm elections, the probability of a rate hike in September remains low, and the short-term center of silver prices is expected to move upward with fluctuations.

The U.S. labor market remains resilient

Inflation and employment data are the Fed's key indicators of focus. The U.S. labor market has shown strong resilience at present, and market attention has shifted to the upcoming inflation data. The performance of CPI and PPI will be the determining factor for the interest rate direction in September.

The non-farm payroll report released by the U.S. Bureau of Labor Statistics showed that employment increased by an unexpectedly large 162,000 jobs in August, well above the expected 53,000, and the unemployment rate remained at 4.1%. The overall strength of the job market was in line with external expectations. Whether the Federal Reserve will raise interest rates at its September monetary policy meeting may depend on the August CPI data.

Unlike most cases in the past few years, the U.S. Bureau of Labor Statistics revised up its nonfarm payroll data for June and July. The month-on-month change in U.S. nonfarm payroll additions in July was revised from a decrease of 23,000 to an increase of 21,000. The month-on-month change in U.S. nonfarm payroll additions in June was revised from an increase of 20,000 to an increase of 31,000. The total number of nonfarm payroll additions in June and July was revised up by 55,000.

Looking at the breakdown data, the private service sector saw a net increase of 86,000 jobs, an increase of 44,000 from the previous month. Among them, the leisure and hospitality industry rebounded sharply, adding 62,000 jobs (an increase of 83,000 from the previous month, which was a technical recovery from the overdecline in July); education and healthcare services added 29,000 jobs. In contrast, the information industry turned negative in net job growth, retail trade and transportation and warehousing saw a decline in net job additions, while utilities and wholesale trade were basically flat. The goods sector added 41,000 non-farm jobs in August, an increase of 12,000 from July, with manufacturing, construction, and mining adding 2,000, 4,000, and 6,000 jobs respectively. Employment in the government sector rebounded to 35,000, mainly due to a rebound in local government education employment after falling in the previous month. The average hourly wage in the US in August rose by 3.1% year-on-year, and against the backdrop of rising prices driven by tariffs and the US-Iran conflict, wage growth lagged behind inflation growth.

Overall, the U.S. labor market has continued the "low employment, low unemployment" situation of the past two years. Although policies of the Trump administration to crack down on immigration and the aging population trend have reduced the size of the U.S. labor force, the unemployment rate in August this year fell by 0.2 percentage points compared with the same period last year. The U.S. nonfarm payroll report for August far exceeded expectations, leaving less and less room for the Federal Reserve to refrain from raising interest rates.

Expectations of Fed rate hikes heat up

Current expectations regarding the Federal Reserve's monetary policy remain a key factor influencing the price trend of precious metals. Recently, as the geopolitical situation in the Middle East has escalated and U.S. non-farm payroll data has exceeded market expectations, expectations for a Federal Reserve interest rate hike have continued to rise.

But there are still significant internal divisions. Fed Governor Waller stated that if upcoming data confirms easing inflationary pressures, he would tend to support keeping interest rates unchanged at the Fed's next monetary policy meeting.

Earlier, Fed Chair Waller delivered a speech at the Jackson Hole Global Central Bank Symposium, sending a clear "hawkish" signal. Waller stated that if underlying U.S. inflation does not fall clearly and sufficiently quickly toward the 2% target, the Federal Reserve still has work to do. The 2% inflation target is "firm and unchangeable," and the Fed will ensure the achievement of price stability.

Since taking office as Fed Chair, Walsh has repeatedly stated his commitment to fighting inflation, but he has consistently refused to provide forward guidance on the Federal Reserve's next policy path. This stance has drawn criticism both inside and outside the Fed. At the two meetings of the Federal Open Market Committee chaired by Walsh, the statements released by the Fed have been very concise. Walsh's remarks have maintained an overall "hawkish" tone, indicating that the Fed will not hesitate to take action when necessary and appropriate.

Recently, some Federal Reserve officials have turned "dovish" citing signs of slowing inflation, and centrist voters led by Waller are mostly data-dependent. Therefore, unless August inflation data shows a further slowdown, strong employment data and repeated anti-inflation progress may prompt centrist voters to shift to rate hikes at the September monetary policy meeting.

Global Bond Yields Rise

Recently, global bonds have faced concentrated selling. The "resurgence of conflict" in the Middle East has pushed up international crude oil prices, intensifying investors' concerns about inflation and prompting them to prepare for a series of interest rate hikes. Meanwhile, Federal Reserve Chair Walsh has reshaped market expectations for the interest rate path. In addition, the surge in sovereign debt scales of various countries has led investors to demand higher risk premiums to be willing to lend funds.

For the US Dollar Index, the Federal Reserve's monetary policy expectations are the key factor affecting its trend. Currently, expectations of a rebound in US inflation are heating up, and monetary tightening expectations are also rising accordingly. However, as expectations of global central banks tightening monetary policies grow, the Federal Reserve's interest rate advantage may gradually weaken, and the US Dollar Index also faces significant upward pressure. The repeated geopolitical situation in the Middle East and the possibility of a rebound in US inflation still exist, and the expectation of tight policies supports the upward movement of the US Dollar Index.

In the long run, the strength of the US dollar is unsustainable. The continuous reduction of US dollar assets by global central banks and the high level of the US fiscal deficit are gradually eroding the long-term credit of the US dollar, which to a certain extent supports the prices of precious metals.

Decline in Industrial Demand

Due to high volatility and strong industrial attributes, silver prices tend to fluctuate more significantly compared to the gold market. In the past few years, against the backdrop of China-led new energy revolution, the photovoltaic industry has led the industrial demand for silver.

It is estimated that the total supply of silver in 2026 will be 33,167 tons, a decrease of 747 tons compared with 2025. Among them, the mine supply is 26,254 tons and the recycled silver is 6,571 tons. In terms of demand, the total global demand for silver in 2026 is expected to be 34,606 tons, a decrease of 560 tons from 2025. Among this, industrial demand has continued to decline for three consecutive years, with an estimated 19,894 tons of industrial demand in 2026, accounting for 57% of the total silver demand, compared with 20,447 tons in 2025. The demand for silver in the photovoltaic industry has continued to drop, and the silver consumption for photovoltaic is expected to be 4,698 tons in 2026, a decrease of 932 tons from 2025. The physical demand for silver in 2026 will increase somewhat, reaching an estimated 8,013 tons. Although there may still be a certain supply-demand gap for silver this year, silver consumption will face certain pressure with the end of the domestic photovoltaic "rush installation boom".

In summary, under the disturbance of macroeconomic factors, the investment enthusiasm of funds for silver needs to be restored, and the upside space of silver prices is limited. The market volatility has risen recently, so caution is required for one-way trading.

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