Silver edges higher but remains constrained below $51.00 amid mixed market signals

• Silver edges higher after rebounding from near $50.00 but remains capped below $51.00.
• Risk aversion persists after Japan's warnings to China and ahead of a wave of delayed US data.
• Market bets on a December Fed rate cut have softened, keeping XAG/USD sensitive to USD moves.

Silver (XAG/USD) trades slightly higher on Monday, around $50.90 at the time of writing, up 0.50% on the day. The grey metal shows early signs of stabilization after last week's sharp decline from the $54.39 peak, but repeated failures to break and hold above the $51.00 level keep price action trapped in a zone of uncertainty.

The mild recovery at the start of the week unfolds within a broader context of heightened market caution. Renewed geopolitical tensions in Asia, following Japan's warnings to China in the event of an attack on Taiwan, are helping maintain a defensive tone that modestly supports precious metals. However, investors are primarily adopting a wait-and-see approach ahead of a batch of US economic releases delayed by the end of the government shutdown.

This week will be dominated by the first official publications since federal agencies resumed operations, beginning with labor-market indicators, including Nonfarm Payrolls (NFP) on Thursday. These data are expected to shed light on the outlook for the Federal Reserve's (Fed) December policy decision.

Any renewed weakness in the labor market could weigh on the US Dollar (USD) and mechanically support Silver prices, as the metal is denominated in USD. Commonwealth Bank of Australia (CBA) strategist Carol Kong echoed this view, noting that risks are "tilted toward a weaker payrolls print," which would revive expectations of a December cut and put downward pressure on the US Dollar.

However, the metal remains restrained by the still-hawkish tone of several Fed officials over recent days. Kansas City Fed President Jeffrey Schmid said monetary policy must continue to lean against demand and remains "modestly restrictive," limiting the scope for a broader rebound in precious metals. Markets now price in only about a 40% chance of a 25-basis-point rate cut in December, down from more than 60% earlier this month, according to the CME FedWatch tool.