Silver price (XAG/USD) faces selling pressure near $27.90 during the early European trading hours. The renewed US Dollar (USD) demand weighs on the USD-denominated Silver price. Traders are closely watching the highly-anticipated US Nonfarm Payrolls (NFP) report on Friday, which could have an impact on the white metal price.
China’s service activity growth slowed in August, despite the summer travel peak. The Chinese Caixin Services Purchasing Managers’ Index (PMI) dropped to 51.6 in August from 52.1 in July, weaker than the estimation of 52.2. This slowdown in growth has added concerns about the economic slowdown and deterioration of demand in China, which exerts additional selling pressure on the Silver price. China is a top silver exporter globally, so any concerns about Chinese demand can have a significant effect on the price of Silver.
The imminent Federal Reserve (Fed) rate cuts might help support the precious metal in the near term, as it makes Silver cheaper for most buyers. The markets are currently pricing in nearly a 61% possibility of a 25 basis points (bps) rate cut by the Fed in September, while the chance of a 50 bps reduction stands at 39%, according to the CME FedWatch tool. The pace and size of the Fed rate cut could influence the direction of the Silver price in the coming days.
The US August Nonfarm Payrolls (NFP) report on Friday will be more significant than usual and might offer some hints about the size and pace of the Fed rate cut. The US economy is expected to see 163K job additions in August, while the Unemployment Rate is expected to tick lower to 4.2%. A weaker-than-expected reading could prompt speculation of a looming US recession and deeper rate cuts, potentially boosting the Silver price.
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange, though it is less popular than Gold. Investors turn to Silver to diversify their investment portfolio, for its intrinsic value, or as a potential hedge during high-inflation periods. Silver prices can move due to a wide range of factors including:
– Geopolitical instability and fears of a recession
– The US Dollar (USD) performance
– Investment demand
– Mining supply
– Recycling rates
– Industrial demand in sectors such as electronics and solar energy
– Dynamics in the US, Chinese, and Indian economies
Relation with Gold
Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as they share a similar safe-haven status. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, can help determine the relative valuation between both metals. Some investors may use this ratio as an indicator of whether Silver is undervalued or Gold is overvalued.
Overall, the Silver price is currently under pressure from a stronger USD and concerns about Chinese demand. The upcoming US NFP report and Fed rate cut bets could provide further direction to the Silver market. Investors and traders will closely monitor these developments to gauge the future movement of the Silver price in the global market.