Silver Price Forecast: XAG/USD slumps to near $42.00, investors brace for Fed rate decision

• Silver price falls to near $42.05 in Wednesday’s Asian session.

• The white metal edges lower due to some profit-taking and easing US-China tensions. 

• Economists expect the Fed to deliver a 25 bps rate cut at the conclusion of its two-day meeting on Wednesday.

The Silver price (XAG/USD) tumbles to around $42.05 during the Asian trading hours on Wednesday. The white metal retreats from a 14-year high of nearly $42.80 amid some profit-taking. Traders brace for the US Federal Reserve (Fed) interest rate decision later on Wednesday for fresh impetus. 

Some profit-taking and improved risk sentiment amid easing trade tensions between the US and China drag the safe-haven assets like Silver lower. The world’s two largest economies are trying to prevent further breakdown in relations after years of tariffs under US President Donald Trump. Trump recently extended existing tariffs on Chinese goods, totaling about 55%, until November 10.

However, the potential downside for the precious metal might be limited. The Fed is widely expected to announce it is lowering the target for its key lending rate by 25 basis points (bps). That will put it in a range of 4.00% to 4.25%, the lowest level since late 2022. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding white metal. 

Markets have priced in nearly a 96% odds of a 25 bps reduction. However, the decision may not be unanimous. Several Federal Open Market Committee (FOMC) members have expressed differing views on the need for or size of a rate cut.

Traders will also closely monitor the FOMC press conference and a Summary of Economic Projections (SEP), or ‘dot-plot,’ for guidance on the pace of future cuts. Any signs of a dovish tone from the Fed could undermine the Greenback.