Silver prices (XAG/USD) inched closer to the crucial $29.00 resistance level during Thursday’s European session, as the white metal saw modest gains. This rise comes despite investor expectations that the Federal Reserve (Fed) will initiate a gradual reduction in interest rates by 25 basis points (bps) to 5.00%-5.25% this month.
Market anticipation for a more aggressive rate cut by the Fed has faded following the release of the U.S. Consumer Price Index (CPI) data for August. The report indicated persistent inflationary pressures, with core inflation – excluding food and energy – rising by 3.2%, in line with both estimates and the previous month’s figure.
The diminished expectation for a 50 bps rate cut has strengthened the U.S. Dollar and bond yields, as the U.S. Dollar Index (DXY) hovers near 101.70, and 10-year U.S. Treasury yields increase to 3.67%. Higher yields typically dampen silver prices by raising the opportunity cost of holding non-yielding assets like silver. However, silver prices have remained resilient.
Looking ahead, market participants are keenly watching the U.S. Producer Price Index (PPI) data for August, expected at 12:30 GMT, as well as the U.S. Initial Jobless Claims data for the week ending September 6. These data points are significant, particularly with recent Fed commentary emphasizing a focus on minimizing job losses as part of its broader economic strategy.
