Silver Prices Forecast: Price Surge Fueled by Fed Rate Cut Bets

Silver Prices Rally on Weak U.S. Employment Figures

Silver prices surged on Friday, recording their most robust weekly performance since early April, propelled by disappointing U.S. employment figures, prompting speculation of forthcoming interest rate cuts by the Federal Reserve.

At 12:09 GMT, XAG/USD is trading $28.61, up $0.27 or +0.97%.

Investor Sentiment

Investors bolstered their positions, anticipating rate reductions by both the Federal Reserve and European central banks. According to the CME’s FedWatch Tool, traders are currently pricing in a 69% likelihood of a Fed rate cut in September. This sentiment was further reinforced by a notable surge in bets on Fed rate cuts.

Impact of U.S. Economic Data

Silver is continuing its upward trend after a 1% surge on Thursday, driven by higher-than-anticipated claims for unemployment benefits. Heightened uncertainty surrounding U.S. inflation further solidified expectations of a dovish monetary policy stance by the Fed.

Market Reaction

As U.S. Treasury yields experienced a slight uptick on Friday, traders evaluated the impact of the spike in jobless claims on interest rates. The yield on the 10-year Treasury edged up by more than 1 basis point to approximately 4.463%, while the 2-year Treasury yield rose by 1 basis point to 4.823%.

Focus on Fed’s Policy Outlook

Following strong demand in the Treasury Department’s recent auction of 30-year bonds, traders refocused on the Federal Reserve’s interest rate trajectory. Looking ahead, attention is on forthcoming U.S. inflation data and central bank communications for insights into future market trends.

Market Forecast: Bullish Outlook for Silver Prices

The outlook for silver prices remains bullish in the short term amid mounting expectations of Fed rate cuts and lingering economic uncertainty. As traders await further guidance from economic data releases and central bank announcements, silver prices are poised to sustain their upward momentum.

Technical Analysis

The two-day surge in silver prices has put the market in a position to challenge its multi-year high at $29.80, reached on April 12. The current upside momentum is being fueled by a robust short-term uptrend, followed by the 50-day moving average at $26.29 and the 200-day moving average at $23.92.