Silver Prices Drop This Week, Under Pressure from The Fed
Silver prices closed the week with a slight weakening after experiencing volatile movements throughout the trading period.
According to Refinitiv data, spot silver closed at US$6/troy ounce on Friday (4/9/2026). On a weekly basis, silver prices fell by approximately 0.3% compared to the previous Friday’s close.
Movement throughout the week was quite erratic. Prices had strengthened mid-week before facing sharp downward pressure on Friday after US labour market data once again altered market expectations regarding the direction of Federal Reserve (The Fed) interest rates.
Silver Squeezed by Fed Interest Rates
Pressure on silver intensified on Friday after US labour data indicated that the labour market remains solid.
As reported by Reuters, US job growth increased sharply in August, while the unemployment rate held steady at 4.1%. This data has led the market to increasingly price in a potential interest rate hike by the Federal Reserve during its meeting on 15-16 September.
Reuters noted that the probability of an interest rate hike rose to approximately 65%, up from 55% before the labour report was released. Consequently, silver prices plummeted by 3% to US$64.92 per troy ounce during Friday’s trading.
However, this pressure eventually eased. According to Refinitiv data, silver managed to recoup some of its losses to close trading at US$66.19 per troy ounce.
Rising interest rate expectations act as a headwind for silver because precious metals do not provide a yield. When interest rates and bond yields rise, the relative attractiveness of silver diminishes.
Next Week Will Be Decisive
Market focus has now shifted to US inflation data, which is due to be released next week.
According to the official schedule from the Bureau of Labor Statistics (BLS), the August Producer Price Index (PPI) will be released on 10 September, followed by the Consumer Price Index (CPI) on 11 September 2026.
Reuters suggests that this inflation data will provide further clues regarding the direction of the Fed’s policy. Inflation that is higher than expected could further strengthen the case for an interest rate hike and once again pressure silver prices.
Conversely, lower inflation could dampen rate hike expectations and create space for silver prices to strengthen again.
Fundamentals Remain a Support
Amidst short-term pressures, the market fundamentals for silver remain relatively tight.
The Silver Institute estimates that the global silver market will experience a deficit for the sixth consecutive year in 2026, amounting to approximately 67 million ounces. Physical investment is expected to rise by 20% to 227 million ounces, even though industrial demand is projected to decline by about 2% to 650 million ounces.
This implies that while short-term risks for silver stem from the Fed, US inflation, and yield movements, supply deficits could act as a support if macroeconomic pressures begin to subside.
For Indonesia, a rally in silver prices would be good news for mining producers but could represent a cost pressure for industrial users. While the impact on the broader Indonesian economy is limited, for mining companies with exposure to silver, these commodity price movements can affect revenues and margins.