Silver (XAG/USD) slipped slightly in Monday’s Asian session, trading near $40.65 per ounce after retreating from its 14-year high. The pullback comes as traders weigh fresh expectations for multiple Federal Reserve interest rate cuts in 2025, while geopolitical tensions remain in focus.
Fed Rate Cut Bets Drive Precious Metals Market
Following last Friday’s disappointing U.S. Nonfarm Payrolls (NFP) data, market participants have priced in three 0.25% interest rate cuts by the Federal Reserve before the end of this year.
- The August NFP showed an increase of just 22,000 jobs, well below expectations of 75,000.
- July’s reading was revised to 79,000 jobs (from 73,000), still signaling a weakening labor market.
Lower interest rates reduce the opportunity cost of holding non-yielding assets like silver, boosting demand for the white metal. As expectations of a dovish Fed strengthen, silver remains supported despite short-term profit-taking.
Geopolitical Factors: Russia-Ukraine War Developments
Beyond U.S. economic data, geopolitical risks continue to shape safe-haven flows. U.S. President Donald Trump confirmed on Sunday that European leaders will visit Washington early this week to discuss ways to end the ongoing Russia-Ukraine war.
- Trump stated he was “not happy” with the current status of the conflict but expressed optimism that progress toward peace could soon be made.
- Any signs of serious peace negotiations could weigh on silver, as reduced geopolitical risk typically lowers demand for safe-haven assets.
- On the other hand, prolonged or escalating tensions would likely support XAG/USD’s upward momentum.
Technical Outlook for Silver (XAG/USD)
From a technical perspective, silver remains bullish in the medium-term but faces short-term hurdles:
- Immediate support sits around the $40.00–$39.50 zone. A decisive break below this level could trigger further declines.
- Resistance levels to watch are at $41.00 and $41.65, with a sustained break above opening the door toward $42.50–$43.00.
- The Relative Strength Index (RSI) remains in slightly overbought territory, suggesting the potential for minor pullbacks before the next leg higher.
Outlook: Silver Poised for Volatility Ahead of Key Data
The next major catalyst for silver will be Friday’s U.S. Nonfarm Payrolls release, which could provide clearer direction on the Fed’s rate cut path.
- Weaker jobs data would reinforce expectations of aggressive Fed easing, supporting silver prices further.
- Stronger-than-expected numbers, however, could strengthen the U.S. dollar and temporarily pressure silver lower.
Until then, silver is likely to consolidate around the $40.50–$41.00 region, with dips expected to attract buyers in anticipation of sustained bullish momentum.
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