Silver Price Forecast: XAG/USD advances to near $31.00 as looming Fed policy decision

• Silver price extends its upside due to rising expectations of an aggressive rate cut by the Fed.
• The demand for dollar-denominated Silver gains attraction as it becomes cheaper for buyers using other currencies.
• Markets assess demand prospects in China, given that Silver is crucial for a range of industrial applications.

Silver price (XAG/USD) continues its winning streak that began on September 9, trading around $31.00 per Troy ounce during Monday’s Asian session. The non-yielding Silver extends its upside due to growing speculation that the US Federal Reserve will opt for a jumbo 50 basis points rate cut at its upcoming monetary policy meeting.

The demand for Silver is gaining traction due to a weaker US Dollar (USD), driven by lower Treasury yields. As Silver is a dollar-denominated commodity, it becomes cheaper for buyers using other currencies, which helps support increased demand for the precious metal.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades around 100.81 with 2-year and 10-year yields on US Treasury bonds standing at 3.58% and 3.65%, respectively, at the time of writing.

The market is divided over the scale of the rate cut by the Federal Reserve (Fed) on Wednesday. According to the CME FedWatch Tool, markets anticipate 41.0% odds of a 25 basis point (bps) rate cut by the Fed at its September meeting. The likelihood of a 50 bps rate cut has increased to 59.0%, up from 50.0% a day ago.

Additionally, markets are evaluating demand prospects in China after mixed economic indicators. Silver is essential in various industrial applications, such as electronics, solar panels, and automotive components. Given China's status as one of the world's largest manufacturing hubs, the country's industrial demand for Silver is significant.