Silver Price Forecast: XAG/USD posts fresh four-week high $31.50 as Fed dovish bets soar

LONDON (December 9) Silver price (XAG/USD) surges above $31.50 at the start of the week. The white metal strengthens as financial market participants become increasingly confident that the Federal Reserve (Fed) will cut interest rates by 25 basis points (bps) to 4.25%-4.50% in the policy meeting on December 18.

According to the CME FedWatch tool, the probability for the Fed to cut interest rates by 25 bps to 4.25%-4.50% on December 18 has increased to 87% from 62% a week ago. A scenario that historically weighs on the US Dollar (USD) and bond yields but is favorable for non-yielding assets, such as Silver, given that lower yields result in lower opportunity cost for holding an investment in them.

The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, retreats after failing to sustain above the key figure of 106.00. 10-year US Treasury yields tick higher to near 4.16%.

Meanwhile, fresh attempts at a ceasefire between Russia and Ukraine by US President-elect Donald Trump could weigh on the safe-haven demand for Silver. “Zelenskyy and Ukraine would like to make a deal and stop the madness,” Trump wrote on a social media platform. The safe-haven demand for precious metals increases in a heightened geopolitical uncertainty.

This week, investors will focus on the closed-door annual central economic work conference to be held on Dec 11-12, according to Bloomberg. The committee is expected to set priorities for the following year along with scrutinizing current economic performance. The outcome will influence the Silver price, given the application of Silver as a metal in diversified industries.

FXStreet