• Silver price rallies above $31.00 in the aftermath of the Fed’s policy announcement.
• The Fed cut interest rates by 50 bps to 4.75%-5.00%.
• Fed’s bumper interest rate cut signals that inflation is on track to return to the bank’s target of 2%.

Silver price (XAG/USD) delivers a sharp rally above the crucial resistance of $31.00 in Thursday’s European session. The white metal strengthens as the US Dollar (USD) surrenders its early gains and declines. The US Dollar weakens as the dust settles after the Federal Reserve’s (Fed) monetary policy decision in which the central bank announced its first ever interest rate cut in more than four years.

Historically, lower interest rates by the Fed bode well for non-yielding assets, such as Silver, as they reduce the opportunity cost of holding an investment in them.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to near 100.60, following the Fed 50-basis points (bps) interest rate cut to 4.75%-5.00%. The Fed was widely anticipated to cut interest rates but traders were divided over potential rate cut size. A bumper interest rate cut by the Fed gives a clear indication that price pressures are on track to return to the bank’s target of 2%.