XAG/USD rises above $29.00 on favorable sentiment surrounding the Fed

• The price of silver is gaining ground as market participants expect the Fed’s Powell to give a statement on possible interest rate cuts.
• Boston Fed President Susan Collins expressed support for the start of interest rate cuts next month.
• Silver paradise could certainly advance further because of the ongoing impasse to secure a truce between Israel and Hamas.

The price of silver (XAG/USD) is above $29.00 per troy ounce during the Asian hours on Friday. Break-even silver prices are gaining ground ahead of US Federal Reserve (Fed) Chairman Jerome Powell’s speech at the Jackson Hole Symposium later in the North American session. Powell may provide a statement on the possibility of interest rate cuts in the United States (US), which is highly anticipated by market participants.

Several Federal Reserve officials recently expressed optimism about a potential rate cut next month, an outlook also reflected in the FOMC’s final minutes. On Thursday, Boston Federal Reserve Bank President Susan Collins expressed confidence that the US central bank can reduce inflation without triggering a recession and expressed support for the start of interest rate cuts next month, according to Reuters.

Kansas City Fed President Jeff Schmid said in an interview with CNBC in Jackson Hole that he is closely examining the factors behind the rise in the unemployment rate and will rely on the data to determine whether to support a rate cut next month.

The CME FedWatch tool suggests markets are now pricing in a 73.5% chance of a 25 basis point (bps) Fed rate cut at its September meeting, up from 62.0% a year ago day. The probability of a 50 basis point rate cut fell to 26.5% from 38.0% a day earlier.

Silver, a traditional safe-haven asset, may gain support from the ongoing impasse over securing a truce between Israel and Hamas. The standoff raises the risk of a wider conflict in the Middle East. Disagreements over Israel’s military presence in Gaza and the release of Palestinian prisoners are holding back progress on a ceasefire and hostage agreement. Sources, including two Hamas officials and three Western diplomats, indicate that these disputes arose out of additional demands made by Israel after Hamas initially accepted a ceasefire proposal, according to Reuters.

However, demand for silver faced challenges after recent industrial production data from China’s National Bureau of Statistics showed a struggling economy in the world’s largest manufacturing hub. Given the importance of Silver in various industrial applications, this drop in industrial demand is significant.