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Silver retreats as US jobs data temper rate-cut expectations

  • Silver retreats from its weekly peak as upbeat US employment data temper rate-cut expectations.
  • January’s Nonfarm Payrolls surprised to the upside, reinforcing a cautious Federal Reserve stance.
  • Despite the pullback, broader easing bets and geopolitical risks help cushion downside pressure.

Silver (XAG/USD) trades lower on Thursday, hovering around $82.85 at the time of writing, down 1.95% on the day. The white metal is correcting after posting a weekly high at $86.30, while the immediate bullish structure remains intact despite the current pullback.

The recovery that started from last week’s lows near $64.00 is pausing following the latest US labor market report. Data released by the Bureau of Labor Statistics (BLS) show that Nonfarm Payrolls (NFP) increased by 130K in January, above expectations of 70K, while the Unemployment Rate edged down to 4.3%. These figures ease concerns about a sharp slowdown in the US labor market and prompt investors to scale back expectations of imminent monetary easing.

Recent comments from Federal Reserve (Fed) officials also reinforce a cautious stance. Several policymakers underline that inflation remains above target and that keeping interest rates at restrictive levels remains appropriate in the near term. Even so, markets continue to price in close to 50 basis points of rate cuts by year-end, which limits the precious metal’s downside potential.

Moreover, the US Dollar struggles to extend its rebound on Thursday, helping to keep a floor under precious metals. In an environment marked by persistent geopolitical uncertainty and ongoing questions about the exact timing of the Fed’s policy pivot, Silver may continue to trade with heightened volatility, while maintaining a constructive bias as long as easing expectations remain in place.

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.

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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