- Silver price gains ground as weaker employment data raise the odds of the Fed reducing rates in September.
- The CME's FedWatch Tool indicates that the odds of a Fed rate cut in September have increased to 76.2%, up from 65.5% a week earlier.
- The safe-haven Silver could face challenges due to anticipated progress in ceasefire negotiations in the Gaza war.
Silver price (XAG/USD) recovers its recent losses, trading around $31.00 per troy ounce during the European session on Tuesday. Traders await Federal Reserve Chairman Jerome Powell’s testimony on "The Semi-annual Monetary Policy Report" to the US Congress on Tuesday. Powell could provide a broad overview of the economy and monetary policy, with his prepared remarks being published ahead of his appearance on Capitol Hill.
On Friday, weaker employment data from the United States (US) sparked speculation that the Federal Reserve (Fed) might consider reducing interest rates in September. This continues providing support for non-yielding assets like Silver.
The CME's FedWatch Tool indicates that rate markets price in a 76.2% probability of a rate cut in September, up from 65.5% just a week earlier.
Furthermore, inflation figures from the United States are set to be released on Thursday. The US Core CPI is expected to maintain its year-over-year rate at 3.4% in June, with the monthly Core CPI likely remaining steady at 0.2%.
The safe-haven Silver could face challenges as market participants await progress in ceasefire negotiations in the Middle East. A potential ceasefire agreement in Gaza could alleviate risk sentiment and support the riskier assets.
However, according to the White House, significant differences remain between the parties involved, with Hamas expressing concerns over new Israeli actions in Gaza that could jeopardize the potential for an agreement.
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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