Silver Price Outlook: XAG/USD drops under $79.50 as investors take profits

Silver Retreats After Recent Rally

After three consecutive days of gains, silver (XAG/USD) has dropped by 1.75%, with prices hovering near $79.30 per troy ounce during Wednesday's European session. This decline comes as traders take profits following the metal’s surge to all-time highs.

Precious metals priced in US dollars, including silver, have generally retreated as the US Dollar (USD) strengthens ahead of important US economic releases that could influence Federal Reserve policy decisions.

The US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, is advancing for a second straight day and is currently near 98.60.

Later today, investors will be watching the US ADP Employment Change and the ISM Services PMI for December. Attention will then turn to Friday’s US Nonfarm Payrolls (NFP) report, which is forecast to show 55,000 new jobs in December, down from 64,000 in November.

On Tuesday, Fed Governor Stephen Miran advocated for substantial interest rate cuts this year to maintain economic growth, while Minneapolis Fed President Neel Kashkari cautioned that unemployment could rise sharply. According to the CME Group's FedWatch tool, futures markets currently assign roughly an 82.8% chance that the Fed will leave rates unchanged at its January 27–28 meeting.

Despite its reputation as a safe-haven asset, silver is under pressure as investors display greater risk appetite, largely overlooking rising global tensions following US actions in Venezuela and the detention of President Nicolas Maduro.