Silver: XAG/USD jumps to near $31 on multiple tailwinds

LONDON (September 24) Silver (XAG/USD) climbs to near $31.00 in Tuesday’s European session. The white metal gains as on firm speculation for the Federal Reserve (Fed) 50 basis points (bps) interest rate cut in November, the announcement of monetary stimulus by China, and escalating Middle East tensions.

According to the CME FedWatch tool, the likelihood of the Fed reducing interest rates by 50 bps to 4.25%-4.50% in November has increased to 51% from 29% a week ago. This has weighed on the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to near 100.80. Historically, lower US Dollar makes the Silver price an inexpensive bet for investors.

Market expectations for Fed large interest rate cuts have strengthened as recent commentaries from policymakers have indicated that they are worried about deteriorating job growth.

Meanwhile, China’s top regulators have announced a slew of stimulus measure to uplift their economy. This would improve the demand for Silver as metal, given that it has applications in various industries, such as electric vehicles and wires and cables, etc.

In the Middle East region, escalating tensions between Israel and Lebanon's Hezbollah has improved Silver’s demand as a safe-haven asset. Mid-East conflicts deepened after Israel’s airstrike in southern Lebanon on Monday.

FXStreet