Silver Price Forecast: XAG/USD struggles near $30 amid uncertainty over size of Fed interest rate cuts


  • Silver price faces pressures in extending its upside above $30.00 as US bond yields surge.
  • The Fed seems prepared to cut interest rates in September.
  • Investors keenly await the US core PCE inflation data for July.

Silver price (XAG/USD) struggles to extend its upside above the psychological resistance of $30.00 in Tuesday’s New York session. The near-term outlook of the white metal remains upbeat as the Federal Reserve (Fed) is widely anticipated to start reducing interest rates from the September meeting. While investors seek clarity over the likely size by which the Fed will cut its key borrowing rates.

According to the CME FedWatch tool, 30-day Federal Funds Futures pricing data shows that the probability of a 50-basis points (bps) interest rate reduction in September is 28.5%, while rest are favoring a cut by 25 bps.

Meanwhile, San Francisco Fed Bank President Mary Daly supported a quarter-to-a-percentage interest rate cut in September in her interview with Bloomberg on Monday. However, she kept doors open for a bigger one if the labor market deteriorates.

Firm optimism for Fed interest rate cuts in September continues to weigh on the US Dollar and bond yields. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, sees more downside below the year-to-date (YTD) low of 100.53. 10-year US Treasury yields jump to near 3.86% amid caution ahead of the United States (US) core Personal Consumption Expenditure Price Index (PCE) data for July, which will be published on Friday.

Generally, higher yields on interest-bearing assets bode poorly for non-yielding assets, such as Silver, given that they reduce the opportunity cost of holding an investment in them.

Silver technical analysis

Silver price bounced back strongly after discovering firm buying interest near the August 1 high of $29.16 in a four-hour timeframe. The white metal is expected to extend its upside towards July 11 high of $31.75. Upward-sloping 20-day Exponential Moving Average (EMA) near $29.70 warrants more upside.

The 14-period Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, indicating a strong upside momentum.

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.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD tumbles to 2024 lows near 1.0460

EUR/USD tumbles to 2024 lows near 1.0460

The US Dollar gathers extra pace and weigh on the risk complex, sending EUR/USD to new YTD lows near the 1.0460 region as the NA draws to a close on Thursday.

EUR/USD News
GBP/USD dips to multi-month lows around 1.2570

GBP/USD dips to multi-month lows around 1.2570

Further losses now motivate GBP/USD to revisit the vicinty of the 1.2570 zone for the first time since early May, always on the back of the strong move higher in the Greenback.

GBP/USD News
Gold faces extra upside near term

Gold faces extra upside near term

Gold extends its bullish momentum further above $2,660 on Thursday. XAU/USD rises for the fourth straight day, sponsored by geopolitical risks stemming from the worsening Russia-Ukraine war. Markets await comments from Fed policymakers.

Gold News
BTC hits an all-time high above $97,850, inches away from the $100K mark

BTC hits an all-time high above $97,850, inches away from the $100K mark

Bitcoin hit a new all-time high of $97,852 on Thursday, and the technical outlook suggests a possible continuation of the rally to $100,000. BTC futures have surged past the $100,000 price mark on Deribit, and Lookonchain data shows whales are accumulating.

Read more
A new horizon: The economic outlook in a new leadership and policy era

A new horizon: The economic outlook in a new leadership and policy era

The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures