Recent days have brought significant changes in investor expectations regarding the Federal Reserve’s monetary policy, which have notably impacted the futures market, bond yields, and precious metals – especially silver. The rising probability of a rate cut in December has triggered increased price volatility in the silver market, potentially signaling more dynamic movements in the weeks ahead.
30 Day Federal Funds Future (December 2025), source: TradingView
On Friday, the price of 30-day federal funds futures for December rose from 96.175 to 96.215, accompanied by a record trading volume of 255.63 thousand contracts – more than three times the 20-day average. The surge in trading activity reflects a sharp shift in market sentiment: according to the CME FedWatch Tool, the probability of a 25 bp rate cut in December jumped to 69.7%, up from 39.07% just a day earlier.
Probability of interest rate cuts in December 2025 based on 30 Day Federal Funds Futures, source: CME FedWatch Tool
Labor Market and Inflation Data – A Mixed Picture
Labor market data for September, released late due to the previous government shutdown, also contributed to the changing sentiment. Employment rose by 119,000 jobs, significantly above the forecast of 55,000. However, markets also noted an increase in the unemployment rate from 4.3% to 4.4%.
Due to the disrupted publication schedule, October and November data will be released together – with a one-week delay. This means that the upcoming FOMC decision will be based on a limited view of labor market conditions. While the September numbers were better than expected, markets had assumed the Fed would hold rates steady, especially since CPI inflation remains elevated at 3% year-over-year – well above the Fed’s 2% target.
US Annual CPI, source: TradingEconomics
Dovish Signals from the Federal Reserve
Investor sentiment was further influenced by dovish remarks from Federal Reserve officials. John Williams, President of the New York Fed, suggested that a rate cut could be implemented “without jeopardizing the inflation target,” which the market interpreted as a clear sign of a shift toward easing.
Meanwhile, Susan Collins (Boston Fed) said the current level of interest rates is “appropriate,” and Lorie Logan (Dallas Fed) stated she favors “pausing rate changes for a while.” Despite some caution, overall market sentiment is now tilting in favor of a rate cut in December.
Bond Market Reaction and Impact on Risk Assets
The bond market reacted swiftly. The yield on 2-year U.S. Treasuries fell by 4.8 basis points to 3.51%, while the 10-year yield dropped by 3.7 basis points to 4.067%. As a result, the yield curve steepened, with the 2Y–10Y spread rising to 55.5 basis points.
US 2-Year vs. 10-Year Bond Yield Daily Chart, source: TradingView
Growing expectations for lower rates are benefiting not only bonds but also risk assets – including homebuilders and precious metals. For silver, which is highly sensitive to interest rate and inflation expectations, this environment creates heightened volatility.
Silver as a Barometer of Monetary Policy
Silver lost nearly 4% during today's session, falling to around $48.63 per ounce. However, silver contracts began to rise during premarket trading in the US. An hour before the US market closed, they rose above $50.35, reacting to the support zone around $49.40 and reducing the daily price decline to 0.63%.
1 Hour and Daily chart of Silver, source: TradingView
Falling interest rates typically support higher prices for precious metals by lowering the opportunity cost of holding non-yielding assets. However, with uncertainty surrounding the Fed's next moves and analysts divided on the outlook, silver market volatility may continue to rise. Any new signal – whether from labor data, inflation figures, or Fed commentary – could trigger sharp price movements.
For investors, this means one thing: the precious metals market, and silver in particular, is once again acting as a barometer for monetary policy expectations. The volatility we're now seeing may persist through the end of 2025 – and its scale will largely depend on how the Fed responds to upcoming macroeconomic data.
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more (link to: https://think.ing.com/about/content-disclaimer/).
