In the European trading session on Thursday, the price of silver (XAG/USD) experienced a sharp decline, dipping close to $28.70 after reaching a fresh weekly peak at $29.16. This drop in the white metal’s value can be attributed to a robust rebound of the US Dollar (USD) and the surprising contraction of the Caixin Manufacturing Purchasing Managers’ Index (PMI) in July.
The US Dollar Index (DXY), a measure of the dollar against a basket of major currencies, surged to around 104.35 following a recovery from a weekly low of 103.86. The strengthening US Dollar has made investing in silver more costly for traders, contributing to the downward pressure on silver prices.
The unexpected fall in the Caixin Manufacturing PMI to 49.8 from the anticipated 51.5, alongside the previous reading of 51.8, has further impacted silver prices. Silver, a metal widely used in industries like renewable energy and electric vehicles, faces concerns over demand with the slowdown in China’s manufacturing sector.
Despite these challenges, the anticipation of the Federal Reserve (Fed) initiating interest rate cuts in September is expected to mitigate further downside risks for silver prices. The Fed’s decision to maintain interest rates within the range of 5.25% to 5.50% on Wednesday, coupled with indications of easing price pressures and a softening labor market, reinforces expectations of imminent rate reductions.
Looking ahead, market participants are keenly awaiting the release of the United States ISM Manufacturing PMI and the Nonfarm Payrolls (NFP) report for July, scheduled for publication at 14:00 GMT on Friday. These key economic indicators will offer insights into the state of the US economy and are likely to influence future trends in silver prices and market sentiment.
