Silver gains on safe-haven demand, Fed rate cut expectations

LONDON (October 29) Silver (XAG/USD) advances on Wednesday, rising 2.50% for the day to trade around $48.25 per ounce at the time of writing. The grey metal benefits from a renewed appetite for safe-haven assets as investors remain cautious ahead of the Federal Reserve (Fed) monetary policy announcement, while geopolitical tensions and fiscal uncertainty in the United States (US) sustain a favorable backdrop for precious metals.

The rebound in Silver follows Gold's (XAU/USD) climb back above the symbolic $4000 level, supported by expectations of a dovish Fed stance. Market participants largely anticipate a 25-basis-point rate cut at the conclusion of the two-day Federal Open Market Committee (FOMC) meeting on Wednesday, with another cut likely in December. The prospect of lower interest rates weighs on the US Dollar (USD) and Treasury yields, enhancing the appeal of non-yielding assets such as Gold and Silver.

Meanwhile, signs of progress in US-China trade discussions have temporarily eased fears of an escalation in global trade tensions, but political and fiscal headwinds in Washington continue to drive demand for defensive assets. The prolonged US government shutdown, now entering its fourth week, raises concerns over delayed economic data releases, including the Nonfarm Payrolls (NFP) report, which are essential for assessing the strength of the US economy.

In addition, new US sanctions on major Russian energy companies and the cancellation of a planned meeting between US President Donald Trump and Russian President Vladimir Putin contribute to a fragile geopolitical climate, further sustaining safe-haven demand.

FXStreet