Silver Price Forecast: XAG/USD advances towards $31.00 ahead of looming Fed policy decision

• Silver prices extend their rise due to growing expectations of an aggressive rate cut by the Fed.
• Demand for dollar-denominated silver is gaining traction as it becomes cheaper for buyers using other currencies.
• Markets are assessing demand prospects in China, given that silver is crucial for a variety of industrial applications.

Silver (XAG/USD) price continues its winning streak that began on September 9, trading around $31.00 per troy ounce during the Asian session on Monday. The non-yielding silver extends its rise on growing speculation that the US Federal Reserve will opt for a 50 basis point rate cut at its next monetary policy meeting.

Demand for Silver is gaining traction due to a weaker US Dollar (USD), driven by lower Treasury yields. Since Silver is a dollar-denominated commodity, it becomes cheaper for buyers using other currencies, helping to support increased demand for the precious metal.

The Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, is trading around 100.81 with 2-year and 10-year US Treasury bond yields standing at 3.58% and 3.65% respectively, at the time of writing.

The market is divided on the magnitude of the Federal Reserve’s (Fed) rate cut on Wednesday. According to the CME FedWatch tool, markets anticipate a 41.0% probability of a 25 basis point (bps) rate cut by the Fed at its September meeting. The probability of a 50 bps rate cut has risen to 59.0%, up from 50.0% a day ago.

In addition, markets are assessing demand prospects in China following mixed economic indicators. Silver is essential in several industrial applications, such as electronics, solar panels and automotive components. Given China’s status as one of the world’s largest manufacturing hubs, the country’s industrial demand for Silver is significant.