Silver (XAG) Forecast: Will Rate Cut Uncertainty Push Silver Prices Lower?

At 12:35 GMT, XAG/USD is trading $31.50, down $0.33 or -1.03%.

Charting Silver’s Course

Despite the current weakness, silver remains within reach of its 12-year high of $32.72 achieved last week. A sustained move above this level could pave the way for a test of $34.35. On the downside, minor support lies at $31.21, with a potential drop to $30.21 if this level is breached.

Jobs Data Reshapes Rate Cut Expectations

Wednesday’s U.S. private payrolls report showed a stronger-than-expected increase in September, suggesting resilience in the labor market. This data has influenced rate cut expectations, with the CME FedWatch Tool now indicating a 34% probability of a 50 basis point cut in November, down from 49% last week.

Fed’s Inflation Battle May Drag On

Richmond Federal Reserve President Thomas Barkin cautioned that the battle against inflation might take longer than anticipated, potentially limiting the scope for rate cuts. This stance, combined with the robust economic data, has tempered expectations for aggressive monetary easing.

Middle East Tensions Offer Limited Support

Recent escalations in the Middle East, including Iran’s missile attack on Israel and Israel’s subsequent bombing of Beirut, have provided some safe-haven support for silver. However, the impact has been limited by the shifting rate cut expectations.

All Eyes on Friday’s Jobs Report

The focus now shifts to Friday’s U.S. non-farm payrolls report. A weak data print or an uptick in unemployment could push silver towards the upper end of its range, potentially reaching $35. The extent of any move will depend on the data’s weakness and its impact on rate cut expectations.

The current market environment presents a mixed outlook for silver. While geopolitical tensions and potential economic weakness provide some support, the prospect of delayed rate cuts is weighing on prices. Traders should closely monitor Friday’s jobs report for short-term direction.

For the immediate future, silver appears poised for continued volatility. A breakxag above the recent 12-year high could signal further upside potential, while a move below key support levels might trigger a more significant sell-off. Traders should remain vigilant and adjust their positions based on incoming economic data and any shifts in Federal Reserve rhetoric.