Silver (XAG) Prices Retreat Ahead of Fed Meeting: Market Dynamics Intensify

Silver Prices Dip Ahead of Crucial Fed Decision

Silver prices retreat from a two-month high as traders anxiously await the Federal Reserve’s interest rate decision. The market is closely monitoring the Fed’s meeting, with expectations surrounding a potentially aggressive rate cut driving sentiment.

At 11:25 GMT, XAG/USD is trading at $30.62, down $0.08 or -0.26%.

Market Anticipation Builds

Traders are pricing in a 63% chance of a substantial 50-basis-point reduction, up from 34% last week. This shift in expectations is fueled by recent media reports, setting the stage for significant market movements. If realized, a 50-bp cut could propel silver prices beyond $31.10 per ounce, targeting a range of $31.76 to $32.52.

Daily Silver (XAG/USD): Bullish Factors Supporting Silver

• Goldman Sachs maintains a bullish outlook on gold, predicting a price of $2,700 per ounce by early 2025. This optimism extends to silver, benefiting from central bank demand and a weakening dollar.
• Increased ETF demand for gold is reducing available physical supply, further bolstering silver prices.

Geopolitical Tensions Add Support

Recent escalations in the Middle East, especially Hezbollah's threats against Israel, raise concerns over regional stability. This geopolitical uncertainty typically benefits safe-haven assets like precious metals, providing upward pressure on silver prices.

Economic Data and Fed Projections

August retail sales data surprised market expectations, rising 0.1% against a forecasted 0.2% decline. Traders will closely watch the Fed’s economic projections and Chairman Powell’s post-meeting comments for insights into future monetary policy directions.

Market Forecast

The outlook for silver remains bullish if the Fed delivers a 50-bp cut and signals further easing. In this scenario, prices could surge above $32.52, the year’s high. However, a modest 25-bp cut might trigger short-term profit-taking, pushing prices towards the $29.50 to $28.22 support zone. Traders should prepare for increased volatility surrounding the Fed announcement and upcoming economic data releases.