Silver Price Forecast: XAG/USD extends recovery to $30.60 on firm Fed rate-cut prospects

• Silver price rises to $30.60 as US yields fall on backfoot amid firm Fed rate-cut bets.
• Fed rate-cut bets for September have been prompted by easing US labor market strength.
• Investors shift focus to the US NFP report for May for fresh guidance.

Silver price (XAG/USD) recovers further to $30.60 in Thursday’s Asian session. The white metal discovers strong buying interest as normalizing United States (US) labor market conditions boost speculation that the Federal Reserve (Fed) will start reducing interest rates in the September meeting.

The CME FedWatch tool shows that traders see a 68% chance for rate cuts in September. The probability has significantly improved from 47% recorded a week ago. This has weighed heavily on US bond yields. 10-year US Treasury yields are slightly up to near 4.29% but have come down significantly from weekly high of 4.64%. A sharp decline in yields on interest bearing assets reduces the opportunity cost of holding an investment in non-yielding assets, such as Silver.

Investors lose confidence over US labor market strength after weak JOLTS Job Openings data for April and lower-than-expected ADP Employment Change for May.

The US Dollar Index (DXY) falls sharply after failing to extend recovery above 104.40 but holds the immediate support of 104.00. The next move in above-mentioned assets will be influenced by the US Nonfarm Payrolls (NFP) report for May, which will be published on Friday.

Silver technical analysis

Silver price trades in a Rising Channel chart formation on a daily timeframe in which each pullback is considered as buying opportunity by market participants. Advancing 50 and 200-day Exponential Moving Averages (EMAs) around $28.63 and $25.46, respectively, indicate that the overall trend is bullish.

The 14-period Relative Strength Index (RSI) falls back into the 40.00-60.00 range, suggesting that upside momentum has faded. However, the upside bias remains intact.

Silver daily chart