Silver prices (XAG/USD) held steady around $28.00 per troy ounce during European trading hours on Monday, retaining most of its intraday gains. The precious metal’s stability is largely attributed to recent US inflation data, which has bolstered expectations for upcoming Federal Reserve (Fed) interest rate cuts.
Recent figures from the US Personal Consumption Expenditures (PCE) Price Index revealed a modest rise in inflation for June, reinforcing market predictions of a rate-cutting cycle beginning in September. The PCE Index increased by 2.5% year-over-year in June, slightly down from 2.6% in May. On a monthly basis, the index rose by 0.1%, following a flat reading in May. These signs of cooling inflation and easing labor market conditions have led to heightened forecasts of three rate cuts by the Fed in 2024.
Silver’s rise is also supported by geopolitical uncertainties. Recent concerns over a potential escalation in the Middle East have driven demand for safe-haven assets. A rocket attack in the Israeli-occupied Golan Heights, attributed by Israel and the US to Hezbollah, has heightened regional tensions. The strike, which resulted in the deaths of 12 teenagers and children, has prompted Israel’s security cabinet to authorize Prime Minister Benjamin Netanyahu’s government to determine the response strategy.
Further bolstering silver’s appeal, the Chinese government’s plan to allocate CNY 300 billion in bond funds for economic recovery has been seen as supportive for silver, given its importance in various industrial applications. Nonetheless, sluggish economic activity in China has introduced additional selling pressure on the metal, tempering its gains.
Overall, while silver benefits from both US monetary policy expectations and geopolitical tensions, the ongoing economic challenges in China continue to weigh on its price.
