Silver (XAG/USD) extended its decline on Friday, falling to around $38.80 in early European trading. The white metal weakened as traders booked profits and the US dollar firmed, with markets turning cautious ahead of the upcoming US Personal Consumption Expenditures (PCE) Price Index release for July.
Stronger US GDP supports the dollar
Fresh figures from the US Bureau of Economic Analysis (BEA) showed the US economy expanded at an annualized 3.3% in Q2 2025, stronger than the previous estimate. The robust growth data reduced near-term pressure on the Federal Reserve (Fed) to cut interest rates, lending support to the dollar and weighing on USD-denominated commodities such as silver.
Fed outlook and jobs data may limit downside
Despite the upbeat GDP report, softer labor market signals continue to fuel expectations that the Fed may reduce rates in September. According to New York Fed President John Williams, policymakers are open to lowering borrowing costs but will rely heavily on upcoming data before making a decision.
A potential shift to lower interest rates could reduce the opportunity cost of holding silver, providing a cushion for the non-yielding asset and limiting its downside in the near term.
Market outlook
While silver faces short-term pressure from a stronger US dollar and solid GDP figures, expectations of a Fed rate cut and lower yields could provide support, keeping the metal’s outlook balanced ahead of key inflation data.
