Silver Prices Forecast: Fed Rate Cut Hopes Drive XAG/USD Market Up

Silver Prices Edge Higher on Cooling Labor Market Data

Silver prices are climbing for a second consecutive session on Thursday after hitting their lowest level since mid-May earlier in the week. This movement is largely influenced by fluctuations in U.S. Treasury yields and the U.S. Dollar, driven by signs of a cooling labor market and anticipation of the U.S. non-farm payrolls data release on Friday.

At 11:32 GMT, Silver (XAG/USD) is trading $30.30, up $0.30 or +0.99%.

Labor Market Signals

U.S. bond yields are under pressure due to emerging evidence of a slowing labor market, reinforcing the possibility of a Federal Reserve interest rate cut in September. Benchmark 10-year U.S. Treasury yields remain near their lowest point in two months. Data released earlier this week showed private payrolls increased by 152,000 in May, falling short of the expected 175,000. Additionally, April’s job openings were reported at 8.059 million, the lowest in three years.

Economic Data Insights

Investors are scrutinizing the latest economic indicators. On Wednesday, the ISM’s Purchasing Managers Index for the services sector rose to 53.8 in May, exceeding the forecasted 50.7. Readings above 50 suggest sector expansion. Thursday’s market focus includes import and export data, along with initial jobless claims figures, adding further insight into the economic landscape.

Global Central Bank Actions

Globally, central banks are making notable moves. The European Central Bank is expected to announce its first interest rate cut since 2019, despite ongoing inflationary pressures in the euro zone. Canada recently became the first G7 country to cut rates this cycle, following earlier reductions by Sweden and Switzerland. In contrast, the Federal Reserve is not anticipated to initiate rate cuts until later in the year, with the next meeting scheduled for next week.

Market Outlook

Looking ahead, the silver market is supported by expectations of a slowing U.S. economy and a dovish stance from the Federal Reserve. Although another significant rally is unlikely given the substantial gains earlier this year, silver’s resilience around the $30.00 mark is notable.

Market participants are awaiting Friday’s non-farm payrolls data for further direction. The prevailing forecast suggests a rate cut in September, which would reduce the opportunity cost of holding non-yielding bullion. However, a resurgence in U.S. inflation could put downward pressure on silver prices.

In summary, silver prices are poised to benefit from a dovish Federal Reserve and weaker labor market data, with the potential for further gains hinging on upcoming economic reports and central bank actions.

Technical Analysis

Despite silver’s two-day recovery, the short-term trend is down. However, the market is still primarily supported by the uptrending 50-day moving average at $28.58.

Given the short-term range of $32.52 to $29.38, the nearest upside target is its pivot at $30.95. Trader reaction to this 50% level will determine if the market is going to revisit $32.53 or $29.38 or even the 50-day moving average.