Silver Price Analysis: XAG/USD rises near $29.00 on dovish Fed announcement

• Silver price appreciates as dovish Fed comments increase likelihood of aggressive Fed rate cut in September.
• The CME FedWatch tool showed that the probability of a 50 basis point rate cut has risen to 41.0%.
• La Plata, considered a safe haven, may face challenges as tensions ease in the Middle East following the withdrawal of Israeli forces from Jenin.

Silver (XAG/USD) is extending gains for a third consecutive day, trading around $28.90 per troy ounce during early European trading hours on Friday.

Non-yielding assets like Silver may find support on dovish comments made by Federal Reserve (Fed) officials, which increase the chances of an aggressive rate cut by the Fed in September. Lower interest rates could make commodity assets attractive for investors looking for better returns.

Chicago Fed President Austan Goolsbee said Friday that the long-term trend in the labor market and inflation data warrant the Fed easing interest rate policy soon and then steadily over the next year. FXStreet’s FedTracker, which measures the tone of Fed officials’ speeches on a dovish-to-hawkish scale from 0 to 10 using a custom AI model, rated Goolsbee’s words as neutral with a score of 3.8.

According to the CME FedWatch tool, markets fully anticipate 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 risen to 41.0%, up from 30.0% a week ago.

Potential gains for silver could be limited by safe haven flows, given the recent easing of geopolitical tensions in the Middle East. Israeli forces have withdrawn from Jenin and a nearby refugee camp after 10 days of intense conflict, according to Reuters citing Palestinian news agency WAFA.

The Palestinian health ministry reported 21 deaths in the city and countryside. A Reuters observer said the retreating Israeli forces had left behind significant damage to infrastructure.