Silver is gaining momentum through interest rate speculation
The silver market’s recent strength is largely due to growing expectations of another rate cut in the US. Investors are awaiting comments from Fed Chairman Jerome Powell later today for more clarity on future policy. Following the Federal Reserve’s recent 50 basis point rate cut, which took the benchmark rate to 4.75%-5.00%, markets are now pricing in a 62% chance of a further 50 basis point cut in November, according to the CME Fed Watch Tool.
Lower interest rates improve the appeal of non-yielding assets like silver, contributing to the ongoing rally. Despite the strength of the US dollar and rising government bond yields, silver prices continue to rise, driven by speculative flows.
Economic data and Fed policy in pictures
In addition to being focused on Powell’s speech, traders are also awaiting key U.S. economic data, including weekly jobless claims and Friday’s core personal consumption expenditures (PCE) index — the Fed’s preferred inflation measure. These data points will provide further insight into the Federal Reserve’s approach to controlling inflation and could impact silver prices. Additional comments are also expected today from other key Fed officials, including New York Fed President John Williams and Vice Chairman for Supervision Michael Barr.
Silver’s strong performance in 2024
Silver is up more than 30% so far in 2024, supported by US interest rate cuts, safe-haven demand and strong central bank buying of gold. Geopolitical uncertainties have also fueled silver’s rally, with demand continuing to rise as investors seek safer assets. We think silver can continue to rise to $35 per ounce in the coming weeks, provided there are no major setbacks.
Short term market forecast
In the near term, silver is poised to extend its gains, with the potential to reach $35 per ounce if the Federal Reserve signals further rate cuts. However, there may be profit taking at the end of the year, especially if silver moves into overbought territory.
We forecast an average price of $31.76 for the fourth quarter of 2024, as the market may see some short-term corrections after strong performance throughout the year. Traders should remain cautious of increased volatility as silver moves further away from key technical levels.