Silver Price Forecast: XAG/USD surges toward $39.00 as Fed rate cut bets increase

• Silver price appreciates amid rising odds of Fed interest rate cuts.

• The CME FedWatch tool indicates pricing in more than 88% odds for a 25 basis-point Fed rate cut in September.

• Fed’s John Williams said that rates will likely be lowered at some point, though, assessing upcoming data first.

Silver price (XAG/USD) rises more than 0.5%, trading around $38.80 per troy ounce during the early European hours on Thursday. The price of the non-yielding Silver gains ground amid rising odds of US Federal Reserve (Fed) interest rate cuts. Lower interest rates reduce the opportunity cost of holding precious metals over interest-bearing assets, making Silver more appealing.

Traders are now pricing in 88% odds for a cut of at least a quarter-point at the Fed’s September meeting, up from 82% the previous week, according to the CME FedWatch tool. The shift followed President Donald Trump’s bid to exert greater influence over the central bank after trying to oust Fed Governor Lisa Cook and replace her with a more dovish candidate.

Traders await the Q2 US Gross Domestic Product (GDP) Annualized due later on Thursday. Focus will shift toward July Personal Consumption Expenditures (PCE) Price Index data, the Fed's preferred inflation gauge.

New York Fed President John Williams said on Wednesday that interest rates will likely come down at some point, but policymakers will need to review upcoming economic data before deciding for September.

Silver prices receive support from increased industrial demand. China added over 93 gigawatts of solar capacity in May, a 300% year-on-year surge, ahead of policy changes that will make connecting new panels to the grid more difficult.

Meanwhile, China’s solar cell exports rose more than 70% in the first half of 2025, driven by strong PV demand from India. It is worth noting that Silver is used in the conductive paste of photovoltaic cells.