Interest rate cut expectations ignite investment enthusiasm, silver rises above $40 for the first time in 14 years
Driven by expectations of a rate cut by the Federal Reserve, silver prices have surpassed $40 per ounce for the first time, with an increase of over 40% this year. On Monday, spot silver rose by about 1.9%, reaching $40.534. Gold, platinum, and palladium prices also rose in tandem, as precious metals are favored as safe-haven assets. The market widely expects the Federal Reserve to cut rates by 25 basis points this month, and the industrial applications of silver in the clean energy sector also support its price. The global silver market will experience a supply shortage for the fifth consecutive year, with ETF holdings marking the longest inflow cycle since 2020
According to Zhitong Finance APP, driven by the market's rising expectations for the Federal Reserve to cut interest rates this month, investor demand for precious metals continues to strengthen, with silver prices breaking the $40 per ounce mark for the first time since 2011.
On Monday, spot silver rose by about 1.9%, reaching $40.534 per ounce, with a year-to-date increase of over 40%, moving in tandem with gold, platinum, and palladium. Gold prices opened this week with a 0.7% increase, hitting a new high since the historical peak in April.
Amid escalating geopolitical tensions and uncertainty in the financial environment—including multiple criticisms of the Federal Reserve by U.S. President Trump raising concerns about its independence—precious metals continue to be favored by investors as safe-haven assets.
The market widely expects the Federal Reserve to implement a rate cut at its policy meeting this month, and the key U.S. employment data to be released this Friday is expected to further reinforce this expectation. Rate cuts typically benefit precious metals, as they do not yield interest income.
“Federal Reserve official Daly's dovish remarks led traders to overlook last Friday's upward core PCE data and retained the possibility of a 25 basis point rate cut this month,” said Matt Simpson, a senior analyst at City Index. “Although the U.S. appeals court ruled that most tariffs imposed by President Trump are illegal, this further pressured the dollar and pushed gold prices to a four-month high.” It is reported that San Francisco Fed President Daly reiterated on social media last Friday that she supports a rate cut given the risks facing the labor market.
According to the CME FedWatch tool, traders currently estimate an 87% probability that the Federal Reserve will cut rates by 25 basis points later this month.
The industrial application value of silver in clean energy technologies, such as solar panels, also supports its price. According to data from the Silver Institute, the global silver market will experience a supply shortage for the fifth consecutive year in this context.
Investors are pouring into silver-backed exchange-traded funds (ETFs). In August, the fund's holdings increased for the seventh consecutive month, marking the longest inflow cycle since 2020. This has led to a continuous decrease in the freely available silver inventory in the London market, keeping market supply tight
