Silver tumbles to $28.70 as Dollar recovers

Silver (XAGUSD) fell sharply to near $28.70 in Thursday’s European trading after posting a fresh weekly high at $29.16. The white metal dropped as the US Dollar rebounds strongly, and the Caixin Manufacturing PMI surprisingly contracted in July.

The DXY Dollar Index, which tracks the greenback’s value against six major currencies, jumped higher to near 104.35 after rebounding from a weekly low of 103.86. A sharp recovery in the USD has made investment in silver expensive for investors.

Apart from that, unexpected decline in the Caxin Manufacturing PMI to 49.8 from expectations of 51.5 and the prior release of 51.8 has weighed on the silver price.

Silver as a metal has application in various industries such as renewable energy and electric vehicles etc. And, a slowdown in China’s manufacturing sector raises concerns over silver demand.

However, firm speculation that the Federal Reserve will start reducing interest rates in September will keep the downside limited.

The Fed left interest rates unchanged in the range of 5.25-5.50% on Wednesday, as expected, and the acknowledgment of cooling price pressures and easing labour market strength pointed to expectations of rate cuts sooner rather than later.

Going forward, investors will focus on the U.S. ISM Manufacturing PMI later Thursday and Nonfarm Payrolls report for July, which will be published on Friday.

Silver XAGUSD chart by TradingView