Silver Prices Forecast: Precarious Path Ahead as Fed Decision Looms

Silver Market Watch

Silver prices are edging lower on Tuesday, influenced by the strengthening U.S. dollar and investor anticipation of Federal Reserve Chair Jerome Powell’s comments post the central bank’s policy meeting.

At 12:01 GMT, XAG/USD is trading $22.99, down $0.43 or -1.82%.

Dollar Impact and FOMC Meeting

The dollar index’s recent surge to a two-week high has rendered silver more costly for holders of other currencies. Ahead of the Federal Open Market Committee (FOMC) meeting, some market participants exhibit caution, trimming their silver holdings. The Fed is expected to maintain rates but Powell’s remarks on interest rate projections are highly anticipated.

Interest Rate Speculation

Contrary to expectations of early Fed rate cuts, recent U.S. consumer and producer price data suggest persistent inflation, impacting silver’s attractiveness. Market forecasts, as indicated by the CME FedWatch Tool, show about a 55% chance of a rate cut in June, reflecting uncertainty.

Fed’s Monetary Policy Outlook

The Federal Reserve’s upcoming meeting is crucial, as it will provide insights into the economic outlook and monetary policy direction. While rate cuts are not anticipated imminently, the timeline and number of potential cuts remain uncertain, especially given recent inflation data hinting at sustained high rates.

Short-Term Market Forecast

Considering the strength of the dollar and the anticipated Federal Reserve policy stance, the short-term outlook for silver leans bearish. The focus remains on Powell’s comments for clues about future monetary policy.

If the Fed signals a more cautious approach to rate cuts due to persistent inflation, silver prices may face additional downward pressure in the near term.Conversely, any indication of a softer stance on rate hikes could provide some uplift to silver prices.

However, the current market sentiment, driven by robust U.S. economic data and global monetary shifts, suggests a bearish trend in the near term for silver.

Technical Analysis

Silver (XAG/USD) is under pressure on Tuesday despite its current uptrend. A trade through $25.45 will signal a resumption of the uptrend.

A failure to hold $24.74 could encourage some profit-taking with the next target static support at $24.50. The short-term trend will change to down on a trade through $24.01.