In Monday’s New York session, the price of silver (XAG/USD) displayed a robust recovery, finding buying interest near the crucial support level of $30.00. This bounce-back came as US Treasury yields plunged due to a slight improvement in market speculation regarding the Federal Reserve’s (Fed) potential interest rate reduction starting from the September meeting.
The CME FedWatch tool indicates an increased probability of a rate-cut decision in the September meeting, rising to 52% from the previous week’s 49%. This development has exerted downward pressure on US Treasury yields, with 10-year US bond yields declining to 4.46%. Lower yields on interest-bearing assets diminish the opportunity cost of holding non-yielding investments like silver.
The upward revision in the Fed rate-cut expectations can be attributed to a downward revision of the United States (US) Gross Domestic Product (GDP) estimates for Q1, which now stand at 1.3%. Additionally, weak Personal Spending data for April has contributed to the improved sentiment regarding potential rate cuts.
Meanwhile, the US Dollar Index (DXY), which gauges the value of the Greenback against six major currencies, has retreated to 104.50, further supporting the recovery of silver prices.
Looking ahead, investors will closely monitor the release of the US ISM Manufacturing PMI data for May at 14:00 GMT. The PMI is expected to show an improvement, rising to 49.8 from the previous reading of 49.2. However, a figure below the 50.0 threshold suggests a contraction in the manufacturing sector.
