Silver prices (XAG/USD) jumped to near a weekly high of around $28.80 during Wednesday’s North American session. The precious metal’s strength is driven by escalating Middle East conflicts and firm speculation that the Federal Reserve (Fed) will offer dovish guidance on interest rates after keeping them unchanged at 5.25%-5.50%.
An Israeli airstrike on Tehran, which resulted in the death of Hamas leader Ismail Haniyeh, has heightened fears of a full-scale war between Israel and Iran. Historically, such geopolitical tensions increase the safe-haven appeal of precious metals.
Investors are eagerly awaiting the Fed’s monetary policy announcement at 18:00 GMT. Market experts predict the Fed will signal rate cuts in September, as inflation appears to be aligning with the bank’s 2% target. Additionally, signs of weakening in the United States (US) labor market are expected to support the case for rate cuts.
Earlier in the American session, the US ADP Employment report for July showed weaker-than-expected results. The report indicated lower private sector payroll growth, with only 122,000 jobs added compared to the forecast of 150,000 and the previous month’s revised figure of 155,000. This weak employment data has put pressure on the US Dollar and bond yields.
The US Dollar Index (DXY), which measures the Greenback against six major currencies, fell below 104.00, and 10-year US Treasury yields dropped below 4.10%. Lower yields on interest-bearing assets reduce the opportunity cost of investing in non-yielding assets like silver.
