Silver Price Forecast: XAG/USD rises towards $30.00 as Fed could make a significant rate cut

• Silver prices are advancing as recent US data strengthened the likelihood of a 50 basis point rate cut by the Fed.
• The CME’s FedWatch tool indicates that the probability of a 50 basis point rate cut has risen to 41.0%, from 14.0% yesterday.
• Markets are assessing demand prospects in China while considering the growth of renewable energy, which is crucial to Silver demand.

Silver (XAG/USD) price continues its winning streak that began on September 9, trading around $29.90 per troy ounce during Asian hours on Friday. Non-yielding assets like Silver received support after economic data from the United States (US) reinforced the possibility that the Federal Reserve (Fed) could lower interest rates by 50 basis points next week. Lower interest rates make non-yielding assets more attractive for investment returns.

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 risen sharply to 41.0%, from 14.0% yesterday.

The US Producer Price Index (PPI) rose to 0.2% MoM in August, beating the expected 0.1% increase and 0.0% previously. Meanwhile, the Core PPI accelerated to 0.3% MoM, versus the expected 0.2% increase and 0.2% contraction in July. However, US Initial Jobless Claims rose slightly for the week ending September 6, rising to the expected 230K from the previous reading of 228K.

On Thursday, the European Central Bank (ECB) lowered the Main Refinancing Operations rate to 4.0%, implementing a 25 basis point rate cut. In addition, UK GDP showed no growth in July, after stagnating in June, reinforcing expectations of a possible quarter-point rate cut by the Bank of England (BoE) in November. Some traders are also pricing in the possibility of a further rate cut in December.

Markets are assessing demand prospects in China, the world’s largest consumer, following mixed economic signals, while also considering growth in the renewable energy sector, where silver plays a key role in the production of solar panels.