Spot Silver scales 2-month peak as Fed delivers 50bps cut

Spot Silver traded near a fresh two-month high of $31.24 per troy ounce on Thursday, while the US Dollar retreated, after the Federal Reserve began its monetary easing cycle with an out-sized rate cut, the first reduction in borrowing costs since March 2020.

The Fed reduced the target range for the federal funds rate by 50 basis points to 4.75%-5.00% at its September meeting.

The Fed indicated confidence that inflation was moving sustainably toward the 2% target and took action to prevent a slowdown in the labor market.

A rate reduction was largely expected, while there was speculation if a more conservative 25 bps cut would be delivered.

Lower interest rates reduce the opportunity cost of holding Silver, which pays no interest.

Yet, Fed Chair Jerome Powell said at the press conference following the policy decision that half-percentage point rate cuts were not the “new pace.”

Fed policy makers noted they expected the benchmark rate to be cut by additional 50 basis points by the end of this year, by 100 basis points in 2025 and by another 50 basis points in 2026, which would take borrowing costs to a 2.75%-3.00% range.

The US central bank also issued new economic forecasts. Full-year 2024 PCE inflation forecast has been revised down to 2.3% from 2.6% in the June projection.

PCE inflation forecast for 2025 has been lowered to 2.1% from 2.3% previously.

Additionally, full-year 2024 GDP growth forecast has been revised down to 2% from 2.1% in the June projection.

And, the GDP growth forecast for 2025 has been maintained at 2%.

As of 7:58 GMT on Thursday Spot Silver was gaining 3.71% to trade at $31.196 per troy ounce.

Silver Futures for delivery in December were gaining 2.69% to trade at $31.512 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging down 0.21% to 100.723 on Thursday.

Yesterday the DXY went down as low as 100.215, or a level not seen since July 20th 2023.