Silver Prices Forecast: Poised for Technical Breakout Despite Fed Uncertainty

Silver Prices Surge Amidst Awaited U.S. Economic Data

Silver prices surged on Thursday as investors eagerly awaited U.S. economic indicators, particularly the weekly jobless claims data, to glean insights into the Federal Reserve’s potential interest rate cuts. The market’s robust movement positions it for a potential breakout above the near-term high at $27.73. Notably, this rally persists despite the backdrop of increasing Treasury yields and a stronger dollar, factors typically associated with reduced demand for dollar-denominated assets.

At 11:53 GMT, XAG/USD is trading $27.72, up $0.38 or +1.39%.

Market Data and Fed Insights

At 10:38 GMT, the 10-year Treasury yield rose over 2 basis points to 4.506%, while the 2-year Treasury yield climbed by less than 1 basis point to 4.847%. Investors scrutinized comments from Federal Reserve officials, seeking clues on the trajectory of interest rates. Fed policymakers, including Boston Fed President Susan Collins, Minneapolis Fed President Neel Kashkari, and Richmond Fed President Tom Barkin, emphasized the likelihood of steady rates until inflation clearly trends towards the Fed’s 2% target range.

Upcoming Economic Indicators

As the market awaits further guidance, attention is drawn to upcoming economic data. The U.S. weekly jobless claims report is scheduled for Thursday, with the University of Michigan’s consumer sentiment reading expected on Friday. Additionally, next week’s release of the consumer price index data will be closely monitored for further insights into inflation trends.

Outlook and Market Sentiment

Despite market anticipation of a rate cut in September, silver traders remain cautious, particularly in anticipation of the upcoming U.S. inflation report. A hotter-than-expected inflation reading could potentially lead to further price declines. Presently, traders are pricing in a 66% chance of a Fed rate cut in September, a factor influenced by the reduced opportunity cost of holding bullion in a low-interest-rate environment.

Future Prospects

Looking ahead to the remainder of 2024, the outlook for silver remains relatively positive, with potential for another multi-year high. Uncertainties surrounding economic conditions and geopolitical tensions contribute to the favorable sentiment towards silver. Encouragingly, China’s return to growth in both exports and imports in April signals improved demand trends both domestically and internationally, further underpinning the positive outlook for silver.

Technical Analysis

Silver (XAG/USD) is putting on a solid performance on Thursday with the potential for a surge above the minor top at $27.73.

The short-term range is $29.80 to $26.02. Its 50% to 61.8% retracement zone at $27.91 to $28.36 the next potential upside target.

The way of least resistance is up with the intermediate uptrend well-supported by the 50-day moving average at $26.16.