Silver Price Analysis: XAG/USD holds near $31.00 near two-month highs

• Silver price appreciates as non-yielding asset becomes more attractive following Fed rate cut of 50 basis points.
• The BoE, PBoC and BoJ decided to keep their interest rates unchanged in September.
• Safe-haven silver is supported by rising tensions in the Middle East, as Israeli warplanes carried out intense strikes in southern Lebanon.

Silver (XAG/USD) price extends gains for the second consecutive day, trading around $31.10 per troy ounce on Friday. Non-yielding silver receives support following the 50 basis point rate cut by the US Federal Reserve (Fed) on Wednesday.

Additionally, rising expectations of further rate cuts by the US Federal Reserve by the end of 2024 are putting pressure on demand for Silver. The latest dot plot projections indicate a gradual easing cycle, with the average rate for 2024 revised down to 4.375% from the previous forecast of 5.125% in June.

As a non-yielding commodity asset, the precious metal becomes more attractive to investors in a lower interest rate environment as the opportunity cost of holding it decreases. This can lead to Silver potentially offering better returns compared to other assets.

Meanwhile, the People’s Bank of China (PBoC) decided to keep its one-year Lending Prime Rate (LPR) unchanged at 3.35%, while the Bank of Japan (BoJ) kept its interest rate at 0.15% on Friday. Also, on Thursday, the Bank of England (BoE) opted to keep its interest rate at 5%, as widely expected.

Demand for a safe haven for silver was reinforced by rising tensions in the Middle East, as Israeli warplanes carried out their most intense strikes on southern Lebanon in nearly a year of conflict on Thursday night. The White House declared a diplomatic solution was both achievable and urgent, while Britain called for an immediate ceasefire between Israel and Hezbollah, according to Reuters.