Silver prices (XAG/USD) continue their upward trajectory, trading at approximately $29.90 per troy ounce during Friday’s Asian session. The precious metal’s rally, which began earlier in the week, has been bolstered by recent US economic data suggesting a potential interest rate cut by the Federal Reserve (Fed) next week. Lower interest rates enhance the appeal of non-yielding assets like silver by improving investment returns.
The CME FedWatch Tool indicates that markets are now fully anticipating at least a 25 basis point (bps) rate cut from the Federal Reserve in its September meeting. Expectations for a more substantial 50 bps cut have surged to 41.0%, a significant increase from 14.0% just one day prior.
Recent US economic data has contributed to this outlook. The Producer Price Index (PPI) for August rose by 0.2% month-on-month (MoM), surpassing the forecasted 0.1% increase and the prior month’s 0.0%. The core PPI, which excludes food and energy prices, accelerated by 0.3% MoM, beating the expected 0.2% rise and contrasting with a 0.2% contraction in July. Additionally, US Initial Jobless Claims for the week ending September 6 increased slightly to 230K, from the previous 228K.
In Europe, the European Central Bank (ECB) reduced the Main Refinancing Operations Rate to 3.65% from 4.25%. Meanwhile, the UK’s GDP showed no growth in July, maintaining the stagnation seen in June, and strengthening expectations for a possible quarter-point rate cut by the Bank of England (BoE) in November, with some traders also speculating on a potential additional cut in December.
Market participants are also evaluating silver demand prospects in China, the world’s largest consumer, amid mixed economic signals. Additionally, the growth of the renewable energy sector, particularly in solar panel production where silver is a crucial component, is contributing to the positive outlook for silver prices.
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