Silver Price Forecast: XAG/USD consolidates below $30 as investors await Fed minutes
|- Silver price trades sideways below $30.00 with FOMC minutes in focus.
- The US Dollar and bond yields remain in a bearish trajectory on Fed rate-cut optimism.
- Fed Powell’s speech at the JH symposium will be the key event this week.
Silver price (XAG/USD) trades in a tight range below the psychological resistance of $30.00, with investors focusing on the Federal Open Market Committee (FOMC) minutes for the July monetary policy, which will be published at 18:00 GMT.
Investors await the FOMC minutes release as it will provide fresh cues about the interest rate path this year. In the July meeting, the Fed left interest rates unchanged in the range of 5.25%-5.50% but assured that policymakers are prepared to adjust the monetary policy stance in case risks emerge that could delay the attainment of banks’ goals, such as inflation at 2% along with the maintenance of full employment.
Ahead of the FOMC minutes, the US Dollar (USD) exhibits a subdued performance and remains near seven-month lows. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, hovers near 101.40. 10-year US Treasury yields decline to near 3.80%. Lower yields on interest-bearing assets reduce the opportunity cost of holding an investment in non-yielding assets, such as Silver.
This week, the US Dollar is expected to remain volatile as Fed Chair Jerome Powell is scheduled to speak at the Jackson Hole (JH) Symposium on Friday. Fed Powell would indicate how much the central bank could cut interest rates this year.
Silver technical analysis
Silver price delivers a bullish reversal as a decisive break above August 2 high of $29.20 has faltered the lower high lower low formation on a four-hour timeframe. An upward-sloping 20-period Exponential Moving Average (EMA) near $29.20 is expected to act as a cushion for Silver price bulls.
The 14-period Relative Strength Index (RSI) falls to near 60.00, suggesting that the bullish momentum has concluded for now. However, the bullish bias remains intact.
Silver four-hour chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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