Silver (XAG/USD) prices moved lower to around $31.20, snapping a two-day winning streak during the early European session on Thursday. The Federal Reserve's (Fed) cautious stance on rate cuts weighed on the white metal.
Federal Chairman Jerome Powell said on Wednesday that the strength of the US economy means the US central bank can afford to be "a little more cautious" about its decisions on interest rate moves. Joseph Brusuelas, chief economist at RSM US, noted that he does not expect further rate cuts after the December meeting until March 2025 at the earliest.
Increasing bets of a less aggressive Fed rate cut could support the greenback and weaken the USD-denominated commodity. The market is now pricing in a 76% chance that the central bank will cut rates by a quarter-point at its December 17-18 meeting, according to the CME FedWatch tool.
On the other hand, the silver market is expected to experience a supply deficit for the fourth straight year due to strong demand. This, in turn, could provide support to silver prices. Carsten Fritsch, precious metals analyst at Commerzbank, said: "Demand for silver for photovoltaics has more than doubled in the past three years and is now almost equal to demand for bars and coins." Fritsch added that rising industrial demand is likely to boost demand for physical silver this year, reaching its second highest level after 2022.
Source: FXStreet
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