close
close

XAG/USD remains below $28.50 as traders brace for US PMI data

Posted on by Vaseline
XAG/USD remains below .50 as traders brace for US PMI data

  • Silver prices saw mild losses around $28.25 during the early Asian session on Thursday.
  • US Nonfarm Payrolls (NFP) for August are being closely watched on Friday.
  • The recovery in the US dollar and pessimism in Chinese growth are weighing on silver prices, but stronger expectations from the Federal Reserve for a rate cut could limit the downward trend.

Silver price (XAG/USD) is trading with a mild bearish bias near $28.25 on Thursday during the early Asian session. The modest recovery in the US dollar (USD) is weighing on the white metal. However, rising speculation that the US Federal Reserve (Fed) will make a deeper rate cut in its upcoming meeting this month could help limit silver’s losses.

The weaker US JOLTS report released on Wednesday raised the odds of a 50 basis point (bps) rate cut by the Fed. According to the CME FedWatch tool, which serves as a barometer of the market’s expectations of the Fed funds target rate, the probability of the Federal Reserve (Fed) cutting rates by 25 basis points (bps) at its September meeting is 57%, while the probability of the Fed cutting rates by 50 bps is 43%. The Fed’s impending rate cuts could limit the precious metal’s near-term downside as it makes XAG/USD cheaper for most buyers.

The US August Nonfarm Payrolls (NFP) are in the spotlight on Friday, with 161,000 new jobs expected in the US economy. In the event of a weaker outcome, this could put some selling pressure on the greenback and push up the USD-denominated silver price.

On the other hand, China’s growth pessimism and demand concerns could undermine the white metal, as China is the world’s largest exporter of silver. Analysts at Bank of America Global Research have cut China’s gross domestic product (GDP) growth forecast to 4.8% in 2024 from 5.0%. Meanwhile, China’s gloomy Caixin Services PMI is contributing to the downturn, falling to 51.6 from 52.1 in July.

Frequently Asked Questions About Silver

Silver is a precious metal that is widely traded by investors. It has historically been used as a store of value and a medium of exchange. Although less popular than gold, traders may turn to silver to diversify their investment portfolio, for its intrinsic value, or as a potential hedge during periods of high inflation. Investors can purchase physical silver, in coins or bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Silver prices can change based on a wide range of factors. Geopolitical instability or fears of a deep recession can cause silver prices to rise due to its safe-haven status, although less so than gold. As a yieldless asset, silver tends to rise at lower interest rates. Movements also depend on how the US dollar (USD) behaves, since the asset is priced in dollars (XAG/USD). A strong dollar tends to keep silver prices at bay, while a weaker dollar is likely to push prices higher. Other factors such as investment demand, mining supply – silver is much more abundant than gold – and recycling rates can also affect prices.

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, because it has one of the highest electrical conductivities of all metals – greater than copper and gold. An increase in demand can cause prices to rise, while a decrease usually causes them to fall. Dynamics in the economies of the US, China and India can also contribute to price volatility: for the US and especially China, their large industrial sectors use silver in various processes; in India, consumer demand for the precious metal for jewellery also plays a major role in setting prices.

Silver prices tend to follow the movements of gold. When gold prices rise, silver tends to follow, since their status as safe haven assets is similar. The gold/silver ratio, which measures the number of ounces of silver needed to equal one ounce of gold, can help determine the relative valuation of the two metals. Some investors may view a high ratio as an indicator that silver is undervalued or gold is overvalued. Conversely, a low ratio may suggest that gold is undervalued relative to silver.

Related Posts