Silver price advances slightly as markets anticipate Fed rate cut

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Silver (XAG/USD) stabilises around $58.60 on Tuesday, up 0.85% on the day, as investors hold their breath ahead of the Federal Reserve’s (Fed) monetary policy decision due on Wednesday.

Silver rises 0.85% on Tuesday, trading near $58.60 as markets adopt a wait-and-see stance ahead of the Fed.
Markets largely expect a 25-basis-point rate cut on Wednesday, reinforcing demand for non-yielding assets.
Signs of a cooling US labor market and cautious remarks from Fed officials strengthen expectations of further monetary easing.

Silver (XAG/USD) stabilises around $58.60 on Tuesday, up 0.85% on the day, as investors hold their breath ahead of the Federal Reserve’s (Fed) monetary policy decision due on Wednesday. The white metal remains stuck in a consolidation phase, a typical behavior when markets anticipate a decisive signal on US interest rates.

Market consensus remains strongly tilted toward a 25-basis-point rate cut, a scenario that is almost fully priced in according to the CME FedWatch tool. Expectations of additional monetary easing are boosting demand for Silver, a non-yielding asset particularly sensitive to real interest-rate movements.

These dovish expectations have been reinforced by the gradual deterioration of the US labor market. Several recent indicators, including weaker hiring momentum and signs of softer labor demand highlighted by Fed officials, have strengthened the case for additional easing. John Williams, President of the Federal Reserve Bank of New York, noted in late November that economic growth had slowed and that labor-market conditions were cooling, adding that further adjustment was likely needed. His cautious tone helped fuel market bets on a more accommodative stance in the near term.

In this environment, the broader sense of caution in financial markets also supports precious metals. Silver benefits from hedging flows in an environment where economic signals are becoming more mixed and investors prepare for a possible revision of the interest-rate outlook for 2026.

Wednesday’s meeting will be decisive. If the Fed confirms a rate cut accompanied by a cautious message, Silver may remain supported or even extend its advance. Conversely, a firmer tone on the future path of interest rates, a 'hawkish cut', could limit the metal’s short-term upside potential.

Silver FAQs

Why do people invest in Silver?

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Which factors influence Silver prices?

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

How does industrial demand affect Silver prices?

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

How do Silver prices react to Gold’s moves?

Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.