Silver Price Forecast: XAG/USD gains ground to near $41.50 as jumbo Fed rate cut bets grow

• Silver price edges higher to near $41.40 in Tuesday’s Asian session. 

• Anticipation of a Fed rate cut, coupled with geopolitical tensions, supports the Silver price. 

• Traders await the US August PPI and CPI inflation reports later this week for fresh impetus. 

The Silver price ( XAG/USD) trades in positive territory for the third consecutive day around $41.40 during the Asian trading hours on Tuesday. The white metal edges higher as weaker job reports in recent months have increased expectations for a jumbo rate cut from the US Federal Reserve (Fed). 

Friday’s US jobs report showed that the US Nonfarm Payrolls (NFP) rose by 22K in August. This figure followed the 79K increase (revised from 73K) recorded in July and was below the market consensus of 75K. A cooling labor market has increased expectations for a Fed rate reduction to boost hiring. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding white metal. 

Additionally, geopolitical tensions and trade war concerns could boost the safe-haven flows, supporting the Silver price. “Safe haven buying is the key factor behind this surge in precious metal prices. Anticipation of a US federal rate cut, coupled with geopolitical tensions and trade war concerns, is pushing investors towards bullion," said Haresh Acharya, director of India Bullion and Jewellers Association (IBJA).

The US inflation report this week could offer more cues about the US interest rate path. The August Producer Price Index (PPI) and Consumer Price Index (CPI) will be published on Wednesday and Thursday, respectively. In case of a surprise uptick in inflation, this could underpin the US Dollar (USD) and cap the upside for the USD-denominated commodity price in the near term.