Silver (XAG/USD) weakened on Friday, trading around $48.85 per troy ounce at the time of writing, down 0.10% for the day, as the market consolidated below the psychological $49 level. The precious metal is taking a breather after its recent rally, fueled by growing expectations of further monetary easing from the US Federal Reserve (Fed).

The latest US Consumer Price Index (CPI) report showed that headline inflation rose by 0.3% month-on-month, lower than the 0.4% forecast, while core inflation slowed to 3.0% year-on-year. The data reinforced expectations that the Fed will maintain its dovish stance, with the market now pricing in a possible 25 basis point rate cut at its October 29-30 meeting and another in December. Lower borrowing costs tend to support demand for non-yielding assets like silver, reducing the opportunity cost of holding this precious metal.

Meanwhile, the US dollar (USD) remains under mild pressure, while Treasury yields have weakened slightly, further supporting the precious metal. The weak tone across US economic data and ongoing political uncertainty related to the ongoing US government shutdown continue to weigh on investor sentiment, maintaining demand for safe-haven assets.

Silver's medium-term outlook remains supported by a combination of easing inflation, expectations of further accommodative Federal Reserve (FED) policy, and a weaker greenback. However, recent macroeconomic data paint a mixed picture for the US economy

The S&P Global Composite Purchasing Managers' Index (PMI) for October rose to 54.8, marking the strongest pace of private sector growth in three months. The Services PMI rose to 55.2 from 54.2, while the Manufacturing PMI rose to 52.2 from 52, indicating broad expansion. This resilience in business activity suggests that domestic demand remains strong despite weakening external trade conditions

Conversely, consumer sentiment data showed a more cautious tone. A University of Michigan survey showed that confidence declined in October, with the headline index falling to 53.6 from 55.1 the previous month. The Consumer Expectations Index also fell to 50.3, while long-term inflation expectations edged up to 3.9%.

These figures confirm that while business activity remains strong, household sentiment continues to weaken, strengthening the case for gradual monetary easing by the Fed in the coming months.

For now, silver prices remain resilient, with declines likely to attract buying interest as the market positions itself for additional monetary easing by the Fed through the end of the year. (alg)

Source: FXstreet