Precious Metals Climb as Silver Breaks $40 to Hit a 14-Year High; Markets Await Upcoming Non-Farm Payroll Data

TradingKey - On Monday, September 1st, silver prices surged past $40, marking the first time since 2011. At the time of writing, spot silver is trading at $40.63, up more than 2% on the day and over 40% year-to-date. Other precious metals like platinum and palladium also posted gains, with gold reaching its highest level since April 23rd.

Analysts attribute the rally mostly to heightened expectations of a Federal Reserve rate cut in September. Lower interest rates generally benefit non-yielding assets such as precious metals.

The non-farm payroll data, set for release this Friday, September 5th, is eagerly anticipated. Economists currently predict that the U.S. added 75,000 jobs in August, with the unemployment rate slightly increasing to 4.3%. This data is expected to reinforce the view of a weakening labor market and potentially bolster the case for a Fed rate cut.

Despite the Personal Consumption Expenditures (PCE) index released last Friday, showing persistent inflation in the U.S., San Francisco Fed President Mary Daly suggested that tariff-induced inflation might be temporary and indicated readiness to lower rates soon. According to the CME's FedWatch tool, traders are now betting with an 87% probability that the Fed will cut rates in September.

Furthermore, geopolitical risks and economic uncertainties have spurred investor demand for safe-haven assets, driving up precious metal prices.

Last week, President Trump expressed a desire to dismiss Fed Governor Lisa Cook. A court ruling on whether she can continue in her role is pending and could impact the Fed's future. Analysts suggest that concerns over Fed independence could undermine investor confidence in the U.S., thus boosting demand for safe-haven assets.

In terms of tariff policies, a U.S. federal appeals court recently ruled that much of Trump's global tariff policy is unlawful, though temporary enforcement is allowed to continue. Treasury Secretary Scott Bessent and other officials warned that overturning these tariffs would undermine negotiations with the EU, Japan, and South Korea. Such changes could reshape trade dynamics, affecting precious metals' trajectories.

Recently, the U.S. Geological Survey proposed including silver in the 2025 "critical minerals list." Citigroup anticipates this move signals potential future high tariffs on silver by the U.S. government, possibly up to 50%. Given that 64% of U.S. silver is imported, Citigroup warns that high tariffs could create significant arbitrage opportunities in COMEX silver futures, driving up prices.

Silver's upward trend remains robust, with a more than 40% gain year-to-date, fueled by long-term supply shortages. According to the Silver Institute, the silver market has been in deficit for five consecutive years due to rising global demand for clean energy technologies like solar panels. Data shows that silver ETF holdings experienced growth for the seventh consecutive month in August, marking the longest inflow streak since 2020.

Citi currently maintains a bullish outlook, predicting silver prices to reach $43 in the next 6 to 12 months and recommends investors hold long positions in COMEX silver.