Silver Price Forecast: XAG/USD slips toward $38.00 as Fed rate cut odds ease
- Silver price weakens ahead of Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium.
- CME FedWatch Tool indicates that markets are pricing a 74% chance of a September rate cut, against 82% on Wednesday.
- The preliminary S&P Global US Composite PMI inched higher to 55.4 in August, from 55.1 prior.
Silver price (XAG/USD) edges lower after registering gains in the previous session, trading around $38.10 per troy ounce during the Asian hours on Friday. Traders adopt caution ahead of the Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole Symposium in Wyoming, which could offer fresh clues on the September policy outlook.
The non-yielding Silver comes under pressure as the potential for higher opportunity costs weighs on sentiment. Strong PMI data alongside an uptick in jobless claims highlight the Fed’s dilemma of managing persistent inflation while confronting a softening labor market. According to the CME FedWatch tool, Fed funds futures traders are now pricing in a 75% chance of a rate reduction in September, down from 82% on Wednesday.
The preliminary S&P Global US Composite PMI inched higher to 55.4 in August, from 55.1 prior. Meanwhile, the US Manufacturing PMI rose to 53.3 from 49.8 prior, surpassing the market consensus of 49.5. Services PMI eased to 55.4 from 55.7 previous reading, but was stronger than the 54.2 expected. Moreover, US Initial Jobless Claims rose to 235K for the previous week, an eight-week high and above the consensus estimate of 225K, suggesting some softening in labor market conditions.
Chicago Fed President Austan Goolsbee said on Thursday that September’s Fed meeting remains open for action. Goolsbee further stated that the Federal Reserve has been receiving mixed signals on the economy. Boston Fed President Susan Collins signaled openness to a rate cut as soon as September, citing tariff headwinds and potential labor market softness, even as near-term inflation risks persist.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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