Silver Price Analysis: XAG/USD holds below $28.50 on market caution and looming US CPI

• Silver prices edge lower as traders remain cautious ahead of the release of US inflation data on Wednesday.
• Non-yielding silver faces minor challenges due to uncertainty over the magnitude of a Fed interest rate cut.
• The CME’s FedWatch tool suggests the probability of a 50bp rate cut has declined slightly to 29.0%.

Silver (XAG/USD) price is trading lower near $28.30 per troy ounce during Asian hours on Tuesday. Traders are cautious ahead of the US inflation report scheduled for release on Wednesday to gain insight into the potential magnitude of the Federal Reserve (Fed) interest rate cut in September. Interest rate changes tend to impact non-yielding assets like Silver.

Last week, US jobs data increased uncertainty about the magnitude of a Fed interest rate cut. US Nonfarm Payrolls (NFP) added 142,000 jobs in August, below the forecast of 160,000 but an improvement from July’s downwardly revised figure of 89,000. Meanwhile, the unemployment rate fell to 4.2%, as expected, from 4.3% the previous month.

According to the CME’s FedWatch tool, markets are fully anticipating at least a 25 basis point (bp) rate cut by the Federal Reserve at its September meeting. The probability of a 50 bp rate cut has declined slightly to 29.0%, from 30.0% a week ago.

Chicago Fed President Austan Goolsbee commented on Friday that Fed officials are starting to align with broader market sentiment that a policy rate adjustment by the U.S. central bank is imminent, according to CNBC. FXStreet’s FedTracker, which uses a custom AI model to rate Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10, rated Goolsbee’s comments as dovish, assigning them a score of 3.2.