Silver Price Forecast: XAG/USD holds ground above $28.50 ahead of ECB decision, US data

• Silver price holds gains ahead of the ECB interest rate decision scheduled for Thursday.
• ECB is highly expected to lower rates to 4.0% by implementing a 25 basis points rate cut.
• August’s US Consumer Price Index data have increased the odds of a 25-basis points rate cut by the Fed in September.

Silver price (XAG/USD) edges higher for the fourth consecutive day, trading around $28.74 during the Asian hours on Thursday. The non-yielding assets like Silver receive support as traders anticipate that the European Central Bank (ECB) will lower interest rates to 4.0% by implementing a 25 basis points rate cut at its upcoming policy meeting later in the day.

Easing monetary policies by central banks globally benefits Silver by reducing the opportunity cost of holding non-interest-bearing bullion assets. August’s US Consumer Price Index (CPI) data showed that headline inflation dropped to a three-year low, which has increased expectations of a 25-basis points rate cut by the Fed in September. Investors will shift focus on the US Producer Price Index and Initial Jobless Claims data scheduled for Thursday for further insights.

Moreover, no growth in the UK economy reinforces expectations of a possible quarter-point rate cut by the Bank of England (BoE) in November. Some traders are also pricing in the possibility of an additional rate cut in December.

The US CPI fell to 2.5% year-on-year in August, down from the previous reading of 2.9% and below the expected 2.6%. The headline CPI rose by 0.2% month-on-month. Core CPI, excluding food and energy, remained steady at 3.2% year-on-year, while it increased to 0.3% month-on-month, up from the previous 0.2% reading.

According to the CME FedWatch Tool, markets are fully anticipating at least a 25 basis point (bps) rate cut by the Federal Reserve at its September meeting. The likelihood of a 50 bps rate cut has sharply decreased to 15.0%, down from 44.0% a week ago.