Chances of a Fed Hike Drop, Silver Soars
Silver prices rose sharply on Thursday (July 2nd) after the US dollar weakened following the release of US employment data that fell far short of expectations. XAG/USD traded around US$60.81 per ounce, after briefly touching the daily high near US$62.
Silver's rise came after the Nonfarm Payrolls report showed the US economy added only 57,000 jobs in June. This figure was far below market expectations of around 110,000 and reinforced signals that labor market momentum was starting to slow.
The May data was also revised down to 129,000 from 172,000. This weakness prompted investors to cut expectations for a Federal Reserve interest rate hike in the near future, particularly for the September meeting.
Following the release of the data, the probability of a Fed rate hike in September fell to around 51% from 63% to 66% previously. This is a positive sentiment for silver, as lower interest rates or easing tightening expectations can reduce the attractiveness of the dollar and bonds.
The US dollar index weakened to around 100.74 after previously touching intraday levels above 101. A weaker dollar makes silver cheaper for buyers using other currencies, thus helping boost demand for the precious metal.
However, silver's strengthening is still not entirely risk-free. Despite weak employment data, the Fed is still facing inflation above its 2% target. If Fed officials make further hawkish comments, the upside potential for XAG/USD could be stifled.
Technically, the US$61 to US$62 area represents important resistance for silver. If the price is able to hold above this area, the opportunity for further strengthening towards US$63 opens up. However, if it fails to maintain momentum, silver risks another correction to the US$60 to US$59 area.
Overall, today's silver rally was driven by a combination of weak US NFP figures, a weakening dollar, and easing Fed interest rate expectations. The market's next focus will be on comments from Fed officials, movements in Treasury yields, and US inflation data to determine whether silver's rally can continue. (arl)
Source: Newsmaker.id
