Silver (XAGUSD) experienced a significant drop to near $28.70 during Thursday’s European trading session, following a fresh weekly high at $29.16. This decline was largely driven by a robust rebound in the US Dollar and an unexpected contraction in the Caixin Manufacturing PMI for July.
Market Dynamics and Economic Indicators
The DXY Dollar Index, which measures the greenback’s value against six major currencies, surged to approximately 104.35 after bouncing back from a weekly low of 103.86. This sharp recovery in the USD has made silver investments more costly for investors.
Adding to the pressure on silver prices was the surprising decline in the Caixin Manufacturing PMI, which fell to 49.8 from an anticipated 51.5 and a previous reading of 51.8. This contraction has raised concerns about silver demand, particularly given its extensive applications in industries such as renewable energy and electric vehicles.
Despite these challenges, there is firm speculation that the Federal Reserve will begin reducing interest rates in September, which could help limit further downside for silver. The Fed recently left interest rates unchanged in the range of 5.25-5.50%, as expected. Their acknowledgment of cooling price pressures and a softening labor market has fueled expectations of imminent rate cuts.
Looking ahead, investors will be closely monitoring the U.S. ISM Manufacturing PMI later on Thursday and the Nonfarm Payrolls report for July, set to be released on Friday.
Source: OANDA
