Silver prices (XAG/USD) are showing signs of weakness as markets prepare for Fed Chair Jerome Powell’s highly anticipated speech at the Jackson Hole Symposium. The precious metal is trading around $38.10 per ounce during early Friday’s Asian session, retreating from recent gains amid shifting market sentiment.
Eased Rate Cut Expectations Weigh on Silver
Silver, a non-yielding asset, faces headwinds as investor sentiment shifts in response to easing expectations for a September Federal Reserve rate cut. The CME FedWatch Tool now indicates a 74% probability of a rate reduction in September, down from 82% earlier this week. This decline in the likelihood of aggressive Fed easing puts upward pressure on the US Dollar, diminishing Silver’s appeal as the opportunity cost of holding the asset rises.
Stronger Economic Data Signals Fed’s Dilemma
The latest economic data is adding complexity to the Fed’s decision-making process. The preliminary S&P Global US Composite PMI rose slightly to 55.4 in August, showing modest improvement from 55.1 in the previous month. The US Manufacturing PMI also saw a notable increase, jumping to 53.3 from 49.8, exceeding expectations. However, the Services PMI slipped slightly to 55.4 from 55.7, though still stronger than expected.
Despite the positive data, US Initial Jobless Claims climbed to 235,000 for the previous week, marking an eight-week high. This suggests some softness in the labor market, adding to the Fed’s challenge of balancing inflation risks with a weakening labor market.
Fed Officials Offer Mixed Signals
Fed officials are sending mixed signals ahead of the central bank’s September meeting. Chicago Fed President Austan Goolsbee stated that the Fed is still weighing its options, while Boston Fed President Susan Collins has expressed support for a potential rate cut, citing economic challenges like tariff headwinds and the labor market’s softening. However, concerns about inflation risks persist, complicating the Fed’s decision-making process.
Technical Outlook: Silver Faces Crucial Support Levels
Silver’s technical outlook remains cautious as it tests key support levels. If Silver fails to maintain its position above the $38.00 level, the price could face further downward pressure. The next critical support zone lies near $37.50, with further declines potentially reaching the $36.80 region.
Conversely, a sustained rebound above $38.50 could suggest renewed bullish momentum, possibly targeting the $39.00 mark. Traders will likely remain on edge until Powell’s speech provides more clarity on the Fed’s future stance and its impact on Silver’s trajectory.
Key Levels to Watch:
- Support: $37.50, $36.80
- Resistance: $38.50, $39.00
As markets await Powell’s speech and further economic indicators, Silver’s direction will depend heavily on shifts in market expectations regarding the Fed’s next move and broader economic conditions.
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