Silver prices extended their rally on Monday, climbing to $42.25 per ounce in Asian trading. The white metal has now advanced for four straight sessions, supported by expectations that the U.S. Federal Reserve will cut interest rates this week for the first time since December 2024.
The Fed’s benchmark rate currently sits in the 4.25%–4.50% range. Markets are pricing in a 25-basis-point cut when officials conclude their two-day policy meeting on Wednesday. Analysts argue that lower borrowing costs reduce the opportunity cost of holding non-yielding assets like silver, making it more attractive to investors.
Carol Kong, currency strategist at Commonwealth Bank of Australia, noted, “We are calling for a 25-basis-point cut from the FOMC this week, which is more than fully priced.” Market participants are also focused on the Fed’s updated economic projections and Chair Jerome Powell’s press conference for clues on how aggressive the central bank will be in easing policy through 2025.
Dollar Weakness Supports Precious Metals
The prospect of monetary easing has pressured the U.S. dollar, bolstering dollar-denominated commodities. Silver, which tends to benefit from both safe-haven demand and industrial use, has become a focal point for traders balancing concerns over global growth with expectations of policy support.
Key market drivers include:
- Fed rate cut probability: Markets see nearly 100% odds of a 25-point reduction.
- Dollar softness: A weaker dollar increases silver’s appeal to overseas buyers.
- Inflation pressures: Annual U.S. inflation is holding near 2.9%, complicating Fed policy.
Despite the momentum, some analysts caution that improved risk sentiment could weigh on silver if investors rotate back into equities and other growth-oriented assets.
U.S.–China Talks Add to Market Uncertainty
Beyond monetary policy, geopolitics continues to shape precious metals markets. U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer met in Madrid with Chinese Vice Premier He Lifeng for a second round of high-level discussions. Talks focused on trade disputes and the future of TikTok’s U.S. operations, a flashpoint in bilateral relations.
Officials also discussed preparations for a potential meeting between U.S. President Donald Trump and Chinese President Xi Jinping at an October summit in South Korea. Any progress on trade or easing tensions could dampen safe-haven flows into assets like silver.
For now, the combination of Fed policy shifts and geopolitical uncertainty keeps silver well supported, with traders eyeing Wednesday’s Fed decision as the week’s defining catalyst.