Silver (XAG) Daily Forecast: Rate Cut Hopes Push Silver to $27.51 Peak

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Published: May 7, 2024, 07:18 GMT+00:00

Key Points:

U.S. Nonfarm Payrolls report raises expectations for Fed rate cuts, weakening the US dollar.
Markets anticipate 46 basis points in Fed rate cuts by 2024, boosting silver demand.
Hawkish comments from Fed's Kashkari could strengthen dollar, potentially lowering silver prices.

Market Overview

Silver prices extended their upward trend, hitting a daily peak of 27.51, buoyed by a faltering US dollar following disappointing US nonfarm payroll data, which heightened expectations for Federal Reserve rate cuts. The prospect of lower interest rates may boost commodity prices, enhancing silver’s attractiveness to international buyers as the dollar’s value declines.

Additionally, Israel’s refusal of a ceasefire proposal and ongoing military actions in southern Gaza heighten concerns over regional instability, potentially bolstering prices of safe-haven commodities like silver.

Impact of Interest Rate Expectations and Fed Commentary on Silver Prices

The recent US nonfarm payrolls report has fueled expectations that the Federal Reserve might reduce interest rates later this year, weakening the US dollar and enhancing the appeal of silver and gold to international markets. Richmond Fed President Thomas Barkin has expressed confidence that current interest rates will moderate inflation to the 2% target, citing a robust job market that provides the Fed with leeway to evaluate further moves.

New York Fed President John Williams also indicated that rate reductions are expected by late this year. Markets anticipate 46 basis points in cuts by the end of 2024, signalling a potential shift towards a more accommodative monetary policy.

This outlook has bolstered silver’s demand, making it more cost-effective for foreign investors. However, upcoming remarks from Neel Kashkari, President of the Minneapolis Federal Reserve, could sway market sentiments. A hawkish stance in his speech could revive the US dollar’s strength and subsequently pressure silver prices.

Impact of Geopolitical Tensions on Silver Prices

On the geopolitical front, Hamas accepted a cease-fire proposal on Monday from Egypt and Qatar. However, Israel rejected the deal, stating that it did not meet its key requirements. Despite this, Israel continued its military operations in Rafah, a city in southern Gaza. Even though it turned down the cease-fire, Israel indicated that it is open to ongoing negotiations.

Therefore, the ongoing geopolitical tensions in Gaza, including continued military operations and stalled cease-fire talks, could boost demand for safe-haven assets like silver. Investors often turn to precious metals during times of uncertainty, seeking stability.

Silver (XAG/USD) Price Forecast

Silver Price Chart

In today’s session, Silver is trading slightly lower at $27.25, marking a decrease of 0.19%. The metal currently sits just above its pivot point at $27.07, suggesting a tentative balance between buyers and sellers.

Immediate resistance is identified at $27.51, with further ceilings at $27.98 and $28.50 that could limit upward movements. Conversely, support levels are established at $26.72, $26.14, and $25.70, where dips might find a floor.

The 50-Day and 200-Day Exponential Moving Averages, at $26.93 and $27.08 respectively, reinforce the pivot point’s role as a critical juncture. Silver shows potential for bullish trends above $27.07, but a descent below this threshold could trigger a significant sell-off.

About the Author

Arslan Aliauthor

Arslan, a webinar speaker and derivatives analyst, has an MBA in Finance and MPhil in Behavioral Finance. He guides financial analysis, trading, and cryptocurrency forecasting. Expert in trading psychology and sentiment.