Silver (XAG/USD) continued its downward trend for the second straight session, trading around $28.50 per troy ounce early on Monday. This decline is largely attributed to improved risk sentiment after the release of the US Personal Consumption Expenditures (PCE) Index data for July, which led traders to temper expectations of an aggressive Federal Reserve rate cut in September.
Fed‘s Rate Cut Outlook Weighs on Silver Prices Last week, Federal Reserve Atlanta President Raphael Bostic, known for his hawkish stance, suggested that it might be “time to move” on rate cuts, citing cooling inflation and a higher-than-expected unemployment rate. FXStreet’s FedTracker, which uses a custom AI model to assess the tone of Fed officials’ speeches on a scale from dovish to hawkish (0 to 10), rated Bostic’s comments as neutral with a score of 5.6.
The CME FedWatch Tool indicates that markets currently see a 70% probability of at least a 25 basis point (bps) rate cut by the Fed at its September meeting. Traders are now closely watching the upcoming US employment data, particularly the Nonfarm Payrolls (NFP) report for August, to gain further clarity on the Fed’s potential rate cut trajectory.
Geopolitical Tensions and Silver’s Safe-Haven Appeal Silver, typically considered a safe-haven asset, may face additional downward pressure due to geopolitical tensions in Israel. On Sunday, widespread protests erupted across the country, with an estimated 500,000 people taking to the streets in Jerusalem, Tel Aviv, and other cities, demanding stronger action from Prime Minister Benjamin Netanyahu to secure a ceasefire and bring home the remaining 101 hostages, according to Reuters.
These developments are likely to keep silver prices volatile as traders balance the metal’s safe-haven appeal against the backdrop of evolving monetary policy expectations and geopolitical risks.
