Silver (XAG/USD) encountered significant selling pressure above the crucial resistance level of $31.00, dropping to approximately $30.50 during Monday’s European session. This decline in the white metal comes as the US Dollar (USD) gains momentum, despite persistent market speculation regarding a potential second consecutive interest rate cut of 50 basis points (bps) by the Federal Reserve.
The US Dollar Index (DXY), which measures the Greenback’s performance against six major currencies, rose sharply by 0.4%, surpassing the 101.00 mark. The strengthening dollar renders investments in precious metals like silver more costly for investors.
According to the CME FedWatch tool, the likelihood of the Fed cutting interest rates by 50 bps to a range of 4.25%-4.50% in November is nearly 50%. Market participants have priced in a total cut of 75 bps by the end of the year. In contrast, Federal Reserve policymakers project the federal funds rate to stabilize at 4.4% by year’s end.
Looking ahead, investors are keenly awaiting the upcoming preliminary S&P Global Purchasing Managers’ Index (PMI) data for September, set to be released at 13:45 GMT. Economists forecast an improvement in the Manufacturing PMI to 48.5, up from August’s reading of 47.9. However, a reading below the 50.0 threshold indicates contraction. Additionally, the Services PMI is expected to show slower growth, with an anticipated reading of 55.2 compared to the previous 55.7.
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