Silver Price Forecast: XAG/USD tumbles to near $30.50 as US Dollar gains ground

LONDON (September 23) Silver price (XAG/USD) faces sharp selling pressure above the key resistance of $31.00 and drops to near $30.50 in Monday’s European session. The white metal drops sharply as the US Dollar (USD) gains ground even though market speculation for the Federal Reserve (Fed) to opt for a second consecutive interest rate cut by 50 basis points (bps) remains firm.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rose swiftly by 0.4% above 101.00. A decent recovery in the Greenback makes investment in precious metals, such as Silver, an expensive bet for investors.

The CME FedWatch tool shows that the probability of the Fed reducing interest rates by 50 bps to 4.25%-4.50% in November is close to 50%. For the remainder of the year, trades have priced in a 75-bps interest rate cut. On the contrary, Fed policymakers see the federal fund rate heading to 4.4% by the year-end.

Going forward, investors will focus on the United States (US) preliminary S&P Global Purchasing Managers’ Index (PMI) data for September, which will be published at 13:45 GMT. Economists estimate the Manufacturing PMI to have improved to 48.5 from 47.9 in August. However, a figure below the 50.0 threshold is considered a contraction. The Services PMI is expected to have expanded at a slower pace to 53.5 from the prior release of 53.7.

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