Silver prices (XAG/USD) rose more than 0.5%, trading around $38.80 per troy ounce in early European trading on Thursday (August 28th). Non-yielding silver prices strengthened amid the increasing likelihood of an interest rate cut by the US Federal Reserve (Fed). Lower interest rates reduce the opportunity cost of holding precious metals compared to interest-bearing assets, making silver more attractive.

Traders now price an 88% chance of a rate cut of at least a quarter point at the Fed's September meeting, up from 82% the previous week, according to the CME FedWatch tool. This shift follows President Donald Trump's efforts to exert greater influence over the central bank after attempting to oust Fed Chair Lisa Cook and replace her with a more dovish candidate.

Traders await the release of US Q2 Annual Gross Domestic Product (GDP) data on Thursday. Focus will shift to July's Personal Consumption Expenditures (PCE) Price Index data, the Fed's preferred inflation gauge.

New York Fed President John Williams said on Wednesday that interest rates are likely to fall eventually, but policymakers need to review upcoming economic data before making a decision for September.

Silver prices are supported by rising industrial demand. China added more than 93 gigawatts of solar panel capacity in May, a 300% jump from a year earlier, ahead of policy changes that will make it more difficult to connect new panels to the grid.

Meanwhile, China's solar cell exports increased more than 70% in the first half of 2025, driven by strong PV demand from India. It's worth noting that silver is used in the conductive paste of photovoltaic cells. (alg)

Source: FXstreet