- Silver prices are likely to gain traction with increasing expectations of three Federal Reserve rate cuts by the end of this year.
- A weak US labor market is expected to support multiple Fed rate reductions in 2025.
- Demand for silver as a safe haven has climbed due to ongoing geopolitical tensions around the world.
The price of silver (XAG/USD) has been on a winning streak, with gains for three consecutive sessions and hitting a new 14-year high of $42.17 during trading in Asia on Friday. This surge has been fueled by market speculation regarding potential Federal Reserve rate cuts, especially after a significant rise in US unemployment claims, which reached the highest level since October 2021.
The increase in unemployment claims, coupled with a disappointing non-farm payroll report, has overshadowed a stronger-than-expected consumer inflation figure. Typically, when interest rates are low, investors look to non-yielding assets like silver to chase better returns.
According to data from the U.S. Department of Labor, initial unemployment claims rose to 263,000, exceeding expectations of 235,000 and up from the previously revised figure of 236,000. Additionally, the US Bureau of Labor Statistics reported that the consumer price index (CPI) rose by 2.9% year-over-year in August, with a monthly increase of 0.4% compared to a prior increase of 0.2%.
The demand for silver as a safe investment has been bolstered by continuing geopolitical unrest. For instance, Poland successfully intercepted Russian drones with assistance from NATO, while Israel intensified its military actions against Hamas. Moreover, reports indicate that China’s sophisticated aircraft carrier has recently navigated through the Taiwan Strait and into the South China Sea, regions of notable tension.
On the industrial front, strong demand from sectors like solar energy, electric vehicles, and electronics is further amplifying the physical silver market. This surge in demand coincides with persistent supply shortages.
