Silver (XAG/USD) extended its rally on Tuesday, trading near $40.85 per ounce in Asian hours — its highest level since September 2011. The precious metal is benefiting from strong safe-haven flows as concerns mount over the Federal Reserve’s independence, policy uncertainty, and renewed tariff disputes under U.S. President Donald Trump.
Fed policy uncertainty keeps markets cautious
July’s U.S. Personal Consumption Expenditures (PCE) Price Index confirmed persistent inflationary pressures, complicating the outlook for Federal Reserve policy. Despite sticky inflation, markets continue to price in an aggressive probability of easing. According to the CME FedWatch tool, traders now assign an 89% chance of a 25 basis point cut in September, up from 84% a week ago.
Investors are also eyeing a heavy U.S. labor market calendar this week, including ADP employment data, Average Hourly Earnings, and Nonfarm Payrolls (NFP) for August. These reports are expected to be decisive for the Fed’s September policy path.
Safe-haven demand bolstered by Fed independence concerns
Silver’s appeal as a safe-haven asset has been reinforced by political turbulence surrounding the U.S. central bank. Uncertainty lingers after a federal court hearing on Friday left unresolved the legality of Trump’s attempt to dismiss Fed Governor Lisa Cook.
Adding to the unease, U.S. Treasury Secretary Scott Bessent acknowledged the importance of Fed independence, but simultaneously criticized the central bank for “a lot of mistakes,” echoing Trump’s demands for lower rates without providing policy clarity.
Tariff dispute adds another layer of volatility
Global trade uncertainty has further stoked demand for precious metals. The U.S. Court of Appeals for the Federal Circuit upheld a ruling that Trump’s sweeping tariffs on foreign imports were illegal. The former president blasted the decision as “highly partisan” and pledged to escalate the case to the Supreme Court, renewing fears of protracted trade frictions.
Outlook
With political risk and monetary policy uncertainty colliding, silver remains well-supported above $40.50. A sustained break higher could open the door to psychological resistance at $41.50 and beyond. Conversely, profit-taking could see XAG/USD retrace toward initial support near $39.80, though safe-haven flows are likely to limit deeper downside.
