Silver (XAG) Forecast: Powell’s Cautious Tone Sends Mixed Signals to Traders

Silver Prices Stabilize as Fed Signals Smaller Rate Cuts

Silver prices remained just below their 12-year high on Tuesday after U.S. Federal Reserve Chair Jerome Powell downplayed the likelihood of further large interest rate cuts. Investors now await key labor market data this week, which could provide additional clarity on the Fed’s future actions and impact silver’s price trend.

At 11:49 GMT, XAG/USD is trading $31.36, up $0.20 or +0.64%.

Silver Hovering Near Key Resistance Levels

Silver is trading around $31.21, a critical level that may dictate near-term price movements. A sustained break below this pivot would signal a bearish outlook, with potential support zones between $30.21 and $29.59. Traders are hesitant to take large positions until more clarity emerges on interest rate policies and labor market conditions.

Powell Hints at Slower Rate Cuts

During a speech on Monday, Powell indicated the Fed would likely adopt a slower pace of quarter-percentage-point rate cuts going forward. He emphasized that the central bank is not in a hurry to ease aggressively, citing strong economic growth and solid consumer spending. This statement cooled expectations for large cuts, with the CME FedWatch tool now showing a 63% chance of a 25-basis-point rate cut in November, up from 47% last week.

Powell’s cautious tone may weigh on silver in the short term, as lower interest rates typically benefit non-yielding assets like silver. However, if labor market data weakens, the Fed could shift towards a more accommodative stance, which would likely support silver prices.

Labor Data Key for Fed’s Next Move

U.S. labor market data due later this week, including ADP employment figures and nonfarm payrolls, could shape the Fed’s decisions. Weaker-than-expected job growth would bolster the case for more aggressive rate cuts, potentially driving silver higher. Additionally, geopolitical risks, such as the escalating Israel-Lebanon conflict, continue to offer support for silver as a safe-haven asset.

Outlook: Volatility Ahead as Data Guides Fed Policy

Silver’s short-term outlook hinges on this week’s economic data and Fed commentary. A bearish move is possible if labor data reinforces Powell’s moderate stance. However, weaker jobs data could ignite a rally, pushing silver above $31.50 per ounce. Traders should brace for volatility as markets react to incoming data and evolving geopolitical risks.