- Silver rises to near $84.25 in Friday’s early European session, up 2.80% on the day.
- Rising geopolitical tensions in the Middle East continue to support demand for safe-haven assets.
- Strong US indicators reduce expectations of an early interest rate cut from the Federal Reserve.
Silver (XAG/USD) trades higher on Friday, climbing toward $84.25 at the time of writing, gaining 2.80% on the day. The precious metal gains momentum as ongoing geopolitical tensions provide some support to the safe-haven asset.
Hopes of a potential diplomatic opening briefly emerged following reports suggesting indirect contact between Tehran and Washington, but Iranian authorities later denied the claims, leaving the outlook for the conflict uncertain.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is moving lower and approaches the 99.00 area, down 0.01% on Thursday. However, a renewed US Dollar demand tends to weigh on Silver, as the metal becomes more expensive for investors holding other currencies.
Several recent economic releases highlight the resilience of the US economy. The ADP Employment Change report showed that the private sector added 63K jobs in February, beating market expectations of 50K and sharply improving from the previous revised reading of 11K. At the same time, the Institute for Supply Management (ISM) reported that the Services Purchasing Managers Index (PMI) rose to 56.1 in February from 53.8 in the previous month, while economists had expected a slowdown to 53.5.
Additional labor market signals also point to underlying strength. Initial Jobless Claims in the US came in at 213K for the week ending February 28, slightly below expectations of 215K. Meanwhile, the Challenger, Gray & Christmas report showed a sharp decline in announced layoffs in February, although hiring plans remain cautious as companies remain wary about expanding their workforce.
Against this backdrop, expectations for an early monetary easing cycle from the Federal Reserve (Fed) have been scaled back. According to estimates based on the CME FedWatch tool, markets increasingly expect the first rate cut to arrive in September, while the chance of the Fed keeping rates unchanged at the July meeting now stands above 50%, compared to 33.4% a week earlier. Higher interest rates generally reduce the appeal of non-yielding assets such as Silver.
Investors are now focusing on upcoming key US data releases, including the Nonfarm Payrolls (NFP) report and Retail Sales figures on Friday. These indicators could offer further clues about the strength of the US labor market and the likely path of monetary policy from the Federal Reserve.
