Silver (XAG/USD) extended its rally on Monday, trading around $66.30 and marking a 2.47% gain for the day, as the metal rebounded from the $63.50 area reached on Friday [1]. This upward move was primarily driven by a weakening US Dollar and a significant shift in market expectations regarding future Federal Reserve (Fed) interest rate hikes [1]. The change in sentiment followed a series of disappointing US economic data releases: US Retail Sales fell by 0.6% in July, missing expectations for a 0.1% increase and reversing a 0.2% rise in June [1]. These figures, combined with a slowdown in both the Consumer Price Index (CPI) and Producer Price Index (PPI), as well as a weak July Nonfarm Payrolls (NFP) report, have contributed to the perception of a slowing US economy and reduced pressure on the Fed to raise rates further [1].
According to the CME FedWatch tool, the probability that the Fed will leave interest rates unchanged at its September meeting has risen to around 70%, up from 48% a week earlier [1]. This repricing has weighed on the US Dollar, with the US Dollar Index (DXY) trading near 99.50 after touching 99.30, its lowest level since June 5 [1]. A weaker US Dollar typically makes precious metals like silver more attractive to investors using other currencies, further supporting the rally [1].
Geopolitical tensions in the Middle East, particularly around the Strait of Hormuz, are also in focus. Persistent risks to energy supplies are keeping oil prices elevated, which could fuel inflationary pressures and potentially limit the Fed’s ability to adopt a more accommodative policy stance [1].
Looking ahead, market participants are awaiting the release of the July Federal Open Market Committee (FOMC) meeting minutes on Wednesday, which could provide further insight into the Fed’s risk assessment and whether the recent decline in rate hike expectations will persist—a key factor likely to influence silver prices in the near term [1].
From a technical perspective, XAG/USD maintains a bullish near-term bias, trading above key moving averages and trend-line support, with immediate resistance at $66.80 and initial support near $65.38 [1].
CONCLUSION
Silver's sharp rise above $66 reflects a combination of weak US economic data, shifting Fed expectations, and a softer US Dollar. The market is now focused on upcoming FOMC minutes for further policy clues, with technicals suggesting continued upside momentum in the near term.