Silver Price Analysis: XAG/USD holds above $28.50 ahead of ECB decision, US data

• Silver prices hold gains ahead of the ECB interest rate decision scheduled for Thursday.
• The ECB is expected to cut rates to 4.0% by implementing a 25 basis point rate cut.
• US Consumer Price Index data for August has raised the odds of a 25 basis point rate cut by the Fed in September.

Silver (XAG/USD) price is moving higher for the fourth consecutive day, trading around $28.74 during Asian hours on Thursday. Non-yielding assets like silver are receiving support as traders anticipate the European Central Bank (ECB) to cut interest rates to 4.0% by implementing a 25 basis point rate cut at its next monetary policy meeting later in the day.

Monetary policy easing by central banks globally benefits silver by reducing the opportunity cost of holding non-interest-bearing bullion assets. US Consumer Price Index (CPI) data for August showed headline inflation fell to a three-year low, which has raised expectations for a 25 basis point rate cut by the Fed in September.

The lack of growth in the economy reinforces expectations of a possible quarter-point rate cut by the Bank of England (BoE) in November. Some traders are also pricing in the possibility of a further rate cut in December. Investors will shift their focus to the US Producer Price Index and Initial Jobless Claims data scheduled for Thursday for further insights.

The US CPI fell to 2.5% year-on-year in August, from the previous reading of 2.9% and below the 2.6% expected. The headline CPI rose 0.2% month-on-month. The core CPI, excluding food and energy, was stable at 3.2% year-on-year, while it rose to 0.3% month-on-month, from the previous reading of 0.2%.

According to the CME’s FedWatch tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting. The probability of a 50 bps rate cut has declined sharply to 15.0%, from 44.0% a week ago.