Silver Price Forecast: XAG/USD drops below $83.00 as inflation fears and strong USD dampen demand

Silver price (XAG/USD) tumbles to near $82.80 during the early European session on Monday. A strengthening US Dollar (USD) and fading expectations for Federal Reserve (Fed) rate cuts exert some selling pressure on the white metal.

The precious metals face some profit-taking after a strong rally as traders rush to hold cash during market turbulence. Additionally, supply disruptions in the Strait of Hormuz fuel inflation fears and further complicate the interest rate outlook.

Markets currently see nearly a 95% probability that US rates will remain unchanged at the March meeting, according to the CME FedWatch tool. This, in turn, provides some support to the Greenback. A stronger USD typically pressures precious metals because it raises the cost of bullion for investors holding other currencies.

However, the worse-than-expected US economic data could drag the USD lower and underpin the USD-denominated commodity price. The US Nonfarm Payrolls (NFP) declined by 92,000 in February, compared to 126,000 (revised from 130,000) increase recorded in January, the US Bureau of Labor Statistics (BLS) showed on Friday. This figure came in weaker than the market expectation for an increase of 59,000 by a wide margin. Meanwhile, the Unemployment Rate rose to 4.4% in February from 4.3% in January.