Silver prices (XAG/USD) dipped to $30.95 early Monday in the European session, pressured by renewed demand for the US Dollar (USD) and increasing US bond yields. However, expectations for potential rate cuts by the US Federal Reserve (Fed) later this year may limit the precious metal’s losses.
Friday’s US employment report revealed a slowdown in job growth and a rise in the unemployment rate to its highest level since late 2021. According to the US Bureau of Labor Statistics (BLS), Nonfarm Payrolls (NFP) increased by 206,000 in June, a significant drop from May’s sharply revised figure of 218,000, originally reported as 272,000. The unemployment rate edged up to 4.1% in June from 4% in May.
The revised NFP figures and the rising jobless rate indicate a softening in the labor market, fueling speculation that the Fed might cut rates in the third quarter. This speculation puts pressure on the USD and provides support for silver. Lower interest rates typically benefit silver prices by reducing the opportunity cost of holding non-yielding assets. According to the CME FedWatch tool, investors now see a 77% chance of a Fed rate cut in September, up from 70% prior to the employment report.
Market participants are also awaiting Fed Chair Jerome Powell’s testimony to the Senate Banking Committee on Tuesday and the US Consumer Price Index (CPI) inflation data for June, due on Thursday. A hawkish Fed stance or higher-than-expected CPI data could dampen rate cut expectations, strengthening the USD and potentially exerting further pressure on silver prices.
