Silver (XAG/USD) prices have edged lower to around $29.70 per troy ounce during the Asian session on Monday. Despite this dip, the non-yielding metal remains attractive to investors in light of expected Federal Reserve (Fed) actions. The CME FedWatch Tool indicates that markets are fully anticipating a minimum 25-basis point rate cut by the Fed in September. This anticipated easing of monetary policy tends to support precious metals, including silver, as lower interest rates reduce the opportunity cost of holding non-yielding assets.
Federal Reserve Chairman Jerome Powell’s comments at the Jackson Hole Symposium on Friday have further bolstered silver’s appeal. Powell noted that “The time has come for policy to adjust,” signaling that rate cuts could be on the horizon. While he did not provide specific details on the timing or magnitude of the cuts, his remarks suggest a shift towards a more accommodative monetary stance due to increased job market risks and decreased inflation risks.
Silver has also seen increased demand due to escalating geopolitical tensions. Over the weekend, Hezbollah launched hundreds of rockets and drones into Israel, prompting significant military responses from Israel. The potential for this conflict to expand further, involving regional powers such as Iran and the U.S., has heightened concerns and driven demand for safe-haven assets like silver.
However, silver’s demand could face challenges from recent economic data out of China. According to the National Bureau of Statistics, China’s economy is showing signs of struggle, particularly affecting the industrial sector. As silver is heavily utilized in various industrial applications, a downturn in industrial activity could negatively impact its demand.
Overall, while geopolitical uncertainties and anticipated Fed rate cuts are supporting silver prices, economic conditions in major manufacturing hubs like China present potential headwinds for the metal.
