For the first time in 14 years, the silver price on the spot market has risen to more than $40 per ounce. Rising expectations of a US Federal Reserve interest rate cut are particularly fueling the rally in the precious metals market. This is because the gold price is also trading just a few dollars below its all-time high of just over $3,500 per ounce.
According to Saxo Bank experts, gold extended its gains from late last week on Monday, primarily due to persistent inflation in the US, weaker consumer confidence, rising interest rate cut expectations for the Fed, and concerns regarding the Federal Reserve’s independence.
Furthermore, key resistances at $40 per ounce for silver and $3,450 per ounce for gold have been overcome. This triggered further buying, it was reported. Other experts also believe that the prospect of lower interest rates, as well as tight supply, have primarily driven silver higher.
Expected Interest Rate Cuts Key Factors for Silver and Gold
Confidence that the Fed would likely implement an interest rate cut as early as September rose after the President of the San Francisco Fed also signaled support for a change in monetary policy, citing developments in the US labor market.
Now the market awaits the US labor market report next Friday. This could allow the Fed to initiate a new interest rate cutting cycle, as lower interest rates are expected to lead to higher investments. According to surveys, the number of new jobs in the US in August – outside the agricultural sector – is expected to have increased by 78,000. In July, the increase was reportedly 73,000 jobs.
One issue that continues to influence the development of precious metal prices, among other things, is the persistent, strong criticism from the White House towards the central bank. This has led many market participants to be greatly concerned about the Fed’s independence from politics. The dispute recently culminated in an attempt by US President Trump to dismiss Fed Governor Lisa Cook, who is taking legal action against it.
In addition, an appeals court ruled that many of the tariffs imposed by Trump are illegal. They remain in effect for now only to allow higher courts to pursue the case further. In any case, this means further uncertainties and unpredictability for global markets, which in turn is good for the safe haven gold.
Given this, as well as expected interest rate cuts, a weaker US dollar, increasing inflows into ETFs, and recovered Indian imports, Morgan Stanley analysts see further potential for both gold and silver. For the yellow metal, there is still 10% further upside potential, while silver has almost met its forecast but shows potential to exceed it, they said.
