Silver Price Forecast: XAG/USD depreciates to near $31.50, decline appears limited

  • Silver price loses ground as recent strong US jobs data could increase the odds of another big Fed rate cut.
  • Richmond Fed President Barkin warned that the fight against inflation may not be over as risks remain.
  • La Plata, as a safe haven, could regain its ground after the increase in geopolitical tensions in the Middle East.

The price of Silver (XAG/USD) retraces its gains recorded in the last two sessions, trading around $31.60 per troy ounce during Asian hours on Thursday. This drop in the price of Silver could be attributed to the recent strong US jobs data, which could increase the chances of the Federal Reserve (Fed) making another big rate cut in November. Lower interest rates reduce the opportunity cost of holding non-yielding assets like Silver, making them more attractive to investors.

ADP’s US employment change report reported an increase of 143,000 jobs in September, exceeding the anticipated 120,000 jobs. In addition, the annual salary increased by 4.7% year-on-year. The total number of jobs added in August was revised upward from 99,000 to 103,000. This report indicates that the labor market is in better condition than previously perceived at the beginning of the third quarter.

Richmond Federal Reserve Bank President Tom Barkin addressed the Fed’s recent rate actions on Wednesday, warning that the fight against inflation may not be over as risks remain. Barkin noted that the 50 basis point rate cut in September was justified because rates had become “out of sync” with declining inflation, while the unemployment rate was close to its sustainable level.

However, the decline in safe-haven assets such as Silver could be limited following increased geopolitical tensions in the Middle East. The Israel Broadcasting Authority (IBA) reported that Israel’s security cabinet has decided to broadcast a strong response to the recent Iranian attack. On Tuesday night, Iran launched more than 200 ballistic missiles and drone strikes on Israel.

Source: Fx Street

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