Silver Price Forecast: XAG/USD drifts higher to near $41.00 on odds of bigger Fed rate cut

• Silver price edges higher to near $41.00 in Wednesday’s Asian session.

• Expectations of a Fed rate cut and a softer US Dollar support the Silver price. 

• Traders await the US August PPI inflation data, which is due later on Wednesday.

The Silver price (XAG/USD) attracts some buyers to around $41.00 during the Asian trading hours on Wednesday. The white metal edges higher amid a weaker US Dollar (USD) and the escalating tension in the Middle East. Traders will take more cues from the US Producer Price Index (PPI) inflation data for August later on Wednesday.

Annual revisions to Nonfarm Payrolls (NFP) data for the year prior to March 2025 showed a fall of 911,000 from the initial estimate. This report indicated a far weaker labor market than what initial numbers showed in that 12-month period, adding to concerns both about the health of the US economy and boosting the expectations of a US Federal Reserve (Fed) interest rate cut. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding white metal. 

Furthermore, rising geopolitical tensions in the Middle East could boost the safe-haven flows and undermine the Silver price. Israel launched a strike on Doha, Qatar, targeting the senior leadership of Hamas, Bloomberg reported on Tuesday. Qatar officials said the attack by Israel violated international law and threatens to widen the conflict in the Middle East.

The US August PPI inflation report on Wednesday could offer some hints about the Fed's interest rate path. Economists expect the headline PPI to show an increase of 3.3% YoY in August, while the core PPI is projected to show a rise of 3.5% YoY during the same period. If the report shows a surprise uptick in inflation, this could lift the Greenback and weigh on the USD-denominated commodity price in the near term.