Silver price consolidates below $49 on Fed rate-cut outlook

• Silver retreats slightly to $48.80 as the market consolidates below the $49 threshold.
• Softer US inflation data reinforces expectations of further Federal Reserve rate cuts.
• Weaker US Dollar and lower yields continue to provide a supportive backdrop for precious metals in the medium term.

Silver (XAG/USD) eases on Friday, trading around $48.85 per troy ounce at the time of writing, down 0.10% for the day, as the market consolidates below the psychological $49 level. The metal is taking a breather after its recent rally, which was driven by growing expectations of further monetary easing from the US Federal Reserve (Fed).

The latest US Consumer Price Index (CPI) report showed that headline inflation rose by 0.3% MoM, undershooting the 0.4% forecast, while core inflation slowed to 3.0% YoY. The data reinforced expectations that the Fed will maintain its dovish stance, with markets now pricing in nearly full odds of a 25-basis-point rate cut at the October 29-30 meeting and another in December. Lower borrowing costs tend to support demand for non-yielding assets such as Silver, reducing the opportunity cost of holding the metal.

At the same time, the US Dollar (USD) remains under mild pressure, while Treasury yields edge lower, further underpinning precious metals. The subdued tone across US economic data and persistent political uncertainty related to the ongoing US government shutdown continue to weigh on investor sentiment, sustaining demand for safe-haven assets.

Silver's medium-term outlook remains supported by the combination of easing inflation, expectations of further Federal Reserve (Fed) policy accommodation, and the softer Greenback. However, the latest macroeconomic data painted a mixed picture of the United States (US) economy.

The S&P Global Composite Purchasing Managers Index (PMI) for October climbed to 54.8, marking the strongest pace of private-sector growth in three months. The Services PMI advanced to 55.2 from 54.2, while the Manufacturing PMI edged higher to 52.2 from 52, pointing to broad-based expansion. This resilience in business activity suggests that domestic demand remains robust despite weakening external trade conditions.

On the other hand, consumer sentiment data offered a more cautious tone. The University of Michigan survey showed that confidence slipped in October, with the headline index falling to 53.6 from 55.1 the previous month. The Consumer Expectations Index also eased to 50.3, while long-term inflation expectations rose modestly to 3.9%.

These figures confirm that while business activity remains strong, household sentiment continues to weaken, reinforcing the case for a gradual pace of monetary easing by the Fed in the coming months.

For now, the Silver price remains resilient, with dips likely to attract buying interest as markets position for additional Fed easing through the end of the year.