Price remains around $53 amid expectations of Fed rate cuts and a weakening dollar, applause ongoing

As the probability of a December interest rate cut by the Federal Reserve exceeds 84%, buying sentiment is forming in the precious metals sector. However, profit-taking from recent sharp gains over the past few days has pushed the spot silver price (XAG/USD) below $53.

Four consecutive days of gains followed by a correction… Fluctuating around $52.80

On Thursday during Asian trading hours, spot silver repeatedly fluctuated around $52.80. After a steep rally over the past four days, fatigue set in, leading to profit-taking sales, but the decline was limited.

Market participants view this as a simple technical correction and are repositioning ahead of next month’s Federal Open Market Committee (FOMC) meeting. With bets on rate cuts strengthening, demand to buy at lower prices is likely to increase each time prices fall, leading to a short-term outlook where upside pressure exceeds downside pressure.

Strong employment data also fails to dampen ‘cut expectations’

Despite continued strength in the US labor market, the market’s view of monetary easing remains unchanged.

According to the US Department of Labor, initial unemployment claims last week totaled 216,000, significantly below market expectations. The four-week moving average, adjusted for volatility, slightly decreased to 223,750, reaffirming the robustness of the job market. Durable goods orders also remained strong.

Nevertheless, the interest rate futures market assesses an over 84% probability of a 25bp rate cut in December. Compared to just 30% a week ago, this represents a rapid shift in sentiment. This is interpreted as a sign that the Fed’s stance of preemptive easing to counteract economic slowdown has become more solidified.

Interest in Fed chair nomination leads to dollar weakness

The process of considering candidates for the next Fed chair by the White House is also acting as a key variable supporting silver prices. Reports indicate that President Trump’s administration is considering Kevin Hasset, the chairman of the National Economic Council (NEC), as a final candidate, and markets view Hasset as someone likely to pursue low-interest and weak-dollar policies.

Such prospects for the nomination suggest that rate cuts could proceed more quickly and aggressively than initially expected. As a result, the dollar has weakened, with the dollar index (DXY), which measures the dollar’s strength against six major currencies, falling for three consecutive trading days to around 99.50.

A weaker dollar reduces the cost of silver for non-dollar investors, potentially encouraging international capital inflows seeking currency gains. The current correction around $53 is seen as a short-term breathing space within the medium- to long-term upward trend.