Silver extends rally amid US fiscal uncertainty, investment inflows

• Silver extends its rally, supported by renewed safe-haven flows amid persistent US fiscal uncertainty.
• The metal benefits from robust investment demand, with ETF inflows and central bank purchases reinforcing its bullish tone.
• Gains may face headwinds as the Federal Reserve's cautious stance limits downside pressure on the US Dollar.

Silver (XAG/USD) edges higher on Thursday, maintaining its recovery above the $48 mark as the United States (US) government shutdown deepens market uncertainty. At the time of writing, XAG/USD trades around $48.40, gaining 0.60% on the day, following a strong rebound from earlier-week lows.

The political stalemate in Washington, now extending into its sixth week, continues to weigh on sentiment and spur demand for safe-haven assets such as Silver and Gold. Investors remain cautious as the budget impasse threatens to curb economic activity and delay key macroeconomic data releases, including the Nonfarm Payrolls (NFP) report.

Meanwhile, the US Dollar (USD) softens slightly, with the US Dollar Index (DXY) retreating below the 100 mark after touching a five-month high earlier this week. The ongoing fiscal uncertainty and mixed US data, including stronger-than-expected readings from the ADP Employment Change report and the Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI), have complicated the outlook for the Federal Reserve's (Fed) next move.

Market participants now expect the central bank to maintain its current policy stance in December, with the probability of a rate cut diminishing after last week's robust data. However, persistent geopolitical tensions, coupled with the shutdown's potential impact on growth, keep the broader outlook for Silver constructive.

According to the World Gold Council (WGC), global demand for precious metals remains solid, bolstered by record inflows into Exchange-Traded Funds (ETFs) and sustained central bank purchases. This backdrop, combined with a softer Greenback, continues to underpin Silver's appeal as an alternative investment and inflation hedge.

In the near term, Silver's gains could moderate as investors await fresh guidance from Federal Reserve officials later in the day. Nonetheless, the combination of political uncertainty, steady ETF inflows, and resilient safe-haven demand suggests that the grey metal is likely to remain supported above the $48 threshold.