Silver Price Prediction: XAG/USD Climbs Toward $38.00 as Fed Rate Cut Bets Strengthen

Silver Gains as Fed Rate Cut Expectations Boost Bullish Sentiment

Silver price (XAG/USD) rallied to around $37.90 during Tuesday’s Asian trading session, posting a 0.73% gain for the day. The white metal is supported by growing market speculation that the Federal Reserve could initiate an interest rate cut as early as September, following a string of softer US macroeconomic data.

The upward momentum comes ahead of the closely watched US Consumer Price Index (CPI) release for July, expected later today. The inflation report may provide stronger signals regarding the Fed’s monetary policy trajectory in the coming months.

Dovish Fed Tone Weakens Dollar, Supports Silver

A weaker-than-expected US jobs report for July and dovish remarks from Fed officials have lowered expectations for sustained policy tightening. The resulting weakness in the US Dollar (USD) has added to silver’s appeal, as the metal becomes cheaper for holders of other currencies.

Silver, a non-yielding asset, typically benefits from falling interest rates, which reduce the opportunity cost of holding the metal. Lower borrowing costs also enhance the attractiveness of safe-haven assets like silver, especially during periods of economic uncertainty.

Rate Cut Bets Drive Market Tone

According to the CME FedWatch Tool, money markets are now pricing in a 90% probability of a Fed rate cut at the September policy meeting. Furthermore, traders expect around 58 basis points of easing through the end of the year—equivalent to two full 25-bps rate cuts, with a roughly one-in-three chance of a third.

However, while silver enjoys upside momentum, some analysts warn that broader risk-on sentiment in financial markets may limit gains in traditional safe-haven assets like precious metals in the near term.