Silver (XAG/USD) has halted its two-day losing streak, trading around $30.80 per troy ounce during early European hours on Tuesday. This upward movement is primarily driven by dovish comments from Federal Reserve Chair Jerome Powell regarding the monetary policy stance, enhancing the appeal of precious metals. Lower borrowing costs make non-yielding assets like silver more attractive to investors.
Fed Chair Jerome Powell remarked on Monday that the year’s three US inflation readings “add somewhat to confidence” that inflation is on course to meet the Fed’s target sustainably, indicating that a shift to interest rate cuts may not be far off.
Additionally, Fed Bank of San Francisco President Mary Daly stated that inflation is cooling in a way that bolsters confidence in achieving the 2% target. However, Daly emphasized the need for more information before making a rate decision.
According to CME Group’s FedWatch Tool, markets now indicate an 85.7% probability of a 25-basis point rate cut at the September Fed meeting, up from 71.0% a week earlier. Investors will closely monitor the US Retail Sales data for June, set to be released later today, for further insights into the US economic situation.
However, the price of silver may face challenges as economic data on Monday showed that China’s economy grew less than expected in the second quarter, with weak domestic demand. Silver is crucial in various industrial applications, such as electronics, solar panels, and automotive components. Given China’s status as one of the world’s largest manufacturing hubs, the country’s industrial demand for silver is significant.
The third plenum of the Chinese Communist Party’s 20th National Congress continues today, held from July 15 to 18. Standard Chartered expects cuts from the People’s Bank of China in rates and the reserve requirement ratio (RRR), as GDP growth decelerated in Q2. China’s growth drivers remain uneven, and trade tensions are rising, with the US and EU imposing new tariffs on Chinese electric vehicles (EVs).
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